Public Utilities Commission testimony looks at pollution, carbon costs

The Minnesota Public Utilities Commission will take testimony Wednesday afternoon on the pollution-related costs of generating power.

In the 1990s, the state began requiring utilities and regulators to factor in the environmental and health costs of pollutants when making decisions about how best to generate electricity. Advocates concerned about climate change, asthma and other effects say those cost figures are long overdue for an update.

The PUC is looking at costs associated with a range of pollutants, including carbon dioxide, sulfur dioxide and fine particles. But leading into today's hearing, carbon emissions and their link to global warming are so far generating the most discussion.

The country's top coal producer, Peabody Energy, has submitted written testimony from experts who argue the cost of carbon is zero. The testimony downplays the widely accepted link between carbon dioxide and global warming — and argue that carbon dioxide even benefits the planet.

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That's in stark contrast to clean energy advocates' urging of state regulators to adopt the so-called "social cost of carbon" values the federal government has identified. Those values factor in impacts such as warmer temperatures, sea level rise and damage to ecosystems. Those values range between $11 and $105 per metric ton, and would rise in the future.

"One thing we know is that zero isn't the right answer," said Stephen Polasky, an economics professor at the University of Minnesota who has researched costs that come with emitting carbon dioxide. Polasky acknowledges there's a lot of uncertainty involved in making the calculations, but he said that shouldn't stop Minnesota from updating the numbers.

"Some people would say, 'Well, it's so uncertain we can't factor it into the analysis,'" he said. "But clearly there are going to be some impacts. So what we want to do is take our best assessment of what those impacts are likely to be and account for a range of impacts."

Polasky submitted testimony to the PUC on behalf of a coalition of environmental and clean energy groups, all of whom assert that adopting the federal numbers would lead to better decisions about electricity.

Some physicians are also interested in using the federal numbers. Environmental attorney Kevin Lee represents a coalition of metro-area doctors. A growing body of medical literature points to climate change as a major public health threat, he said.

"It runs the gamut: Everything from vector-borne diseases, things like malaria, which are spread by things like warmer temperatures in areas where you didn't previously have warm temperatures, and then there are some other problems," Lee said. "Warmer temperatures can interact with air pollution in some pretty damaging ways in the human body."

Lee said that, by factoring in some of these costs, as the federal figures have done, decision-makers have a more accurate picture of possible consequences.

"When a utility does its resource planning, when they go to the PUC and say, 'We want to operate this coal plant for the next 30 years,' the PUC can look at the plan and how it will impact rate payers and how much damage it will cause," Lee said.

Minnesota's largest utility, Xcel Energy, agrees with that concept. Regional Vice President Laura McCarten said considering the costs is prudent and will benefit customers.

"The decisons we make today are with us for 20, 30, 40 years," she said. "As we look at the science that has happened over the last 20 years, we think it's appropriate that some of these numbers do change."

But Xcel doesn't support using the federal carbon numbers. McCarten said the numbers weren't developed to help states like Minnesota plan how to generate electricity, and the utility is urging regulators to adopt a lower range for the cost of carbon.

Business groups are also urging caution, saying increasing the carbon costs too much could lead to energy decisions that are more expensive for rate payers.

Ben Gerber, energy policy director for the Minnesota Chamber of Commerce, said the business group wants to keep energy rates competitive.

"If we don't, then those jobs and production go elsewhere," Gerber said. "In some case they go places that don't have the same pollution controls and concerns that are shared by Minnesota businesses."

The issue will go to an administrative law judge before heading to the PUC for a final decision sometime next year.