MN utilities: Consumers will pay for tougher emissions rules

Three Minnesota utilities that rely heavily on coal-fired power say they expect electricity rates to go up under new federal carbon rules aimed at addressing climate change.

The tougher rules may force power companies to retire coal generating plants early in favor of renewable power. "When you replace old assets that still work with new assets, you're increasing costs, and so rates will go up as a result of this," Loren Laugtug, legislative affairs manager for Otter Tail Power in Fergus Falls, Minn., told state lawmakers Thursday.

"I don't know about total societal costs — that's a whole different issue — but at least rates for electric rate payers will go up," Laugtug added.

Representatives from Great River Energy, Otter Tail Power and Minnesota Power spoke to the state's Legislative Energy Commission Thursday about the U.S. Environmental Protection Agency's Clean Power Plan, which calls for an overall 32 percent reduction in carbon emissions from power plants by 2030, with each state coming up with plans to reach specific targets.

"We expect compliance will be very difficult. Compliance in a way that maintains reliability and keeps costs as low as possible for consumers will be even more difficult," said Eric Olsen, vice president and general counsel for Great River Energy, which has coal plants in North Dakota that serve Minnesota customers.

Notably, Minnesota's largest utility Xcel Energy, did not join the chorus of utilities testifying about increased rates. Rick Evans, Xcel's director of regional government affairs, said officials were still analyzing the Clean Power Plan's potential impact.

When the EPA released the plan this summer, administration officials said customer electricity rates could rise initially but that customers would experience overall savings by the time the rules are fully implemented in 2030. In addition, EPA has said the health and climate change benefits that will result from reducing carbon far outweigh the costs of the transition away from coal.

The plan will bring significant health benefits to states like Minnesota that rely heavily on coal because coal-fired power emits other pollutants besides carbon, Frank Kohlasch, manager of the Minnesota Pollution Control Agency's air assessment division, told lawmakers.

"It could lead to fewer deaths, fewer diseases and fewer hospital visits because of the exposure to fine particles and other air pollutants," he said.

During the hearing, Rep. Melissa Hortman, DFL-Brooklyn Park, pointed out that utilities have suffered financial losses from dealing with the effects of climate change, such as heavy, damaging rainstorms.

But Republicans on the committee said they remained skeptical that the reductions in the Clean Power Plan could mitigate the impacts of climate change as long as other countries, such as China, increase carbon emissions.

The MPCA will be working with utilities, businesses, clean energy advocates and others over the next year to come up with a plan for Minnesota to comply with the new regulations.