Coal play: How lawmakers want to encourage seasonally cutting coal use in Minnesota

In December, Xcel Energy asked Minnesota regulators if it could idle two coal-fired generators during spring and fall when energy demand is lower, an untested plan the utility hopes would slash carbon emissions and lower customers’ bills.

State Rep. Zack Stephenson, DFL-Coon Rapids, liked the idea so much he introduced legislation that would make other Minnesota utilities see if they can do the same.

While the bill wouldn’t force utilities to follow Xcel or vastly change the energy plans of Minnesota power companies, it shows the idea of running part-time coal is gaining traction with lawmakers and clean-energy advocates who want to nudge along the practice. The measure would also ensure the Minnesota Public Utilities Commission can approve a plan like Xcel’s if it wants to.

On Tuesday, Stephenson’s bill, which he deemed the “coal holiday bill,” got its first hearing in a House committee, where a largely sympathetic panel applauded Xcel, but where a leading Republican also said he wanted to make sure fiddling with coal plants wouldn’t interrupt energy service. 

“Turning these resources off for six months of the year threatens, potentially, grid reliability across the system,” said Rep. Chris Swedzinski, R-Ghent, who is the top GOPer on the House’s Energy and Climate Finance and Policy Committee.

Xcel’s plan before the Public Utilities Commission would allow the company to use the Allen S. King Power Plant near Stillwater and Unit 2 of the Sherco power plant in Becker only during winter and summer. The utility asked to switch the King plant to part-time generation as soon as March and transition the Sherco 2 plant in September.

Xcel is already planning to retire both plants soon — King in 2028 and Sherco 2 in 2023 — but the company’s filing with the PUC says operating the coal-fired energy in most “shoulder-season months” would lose money and may be unnecessary as its portfolio of renewable energy grows.

Isabel Ricker, a senior policy associate at St. Paul clean-energy nonprofit Fresh Energy, told the House committee Thursday that many coal plants around the country are operating at a loss. A growing supply of wind power and the dropping cost of renewables is making seasonal coal more feasible, she said. “By taking another look at how we operate power plants and making strategic changes there’s a huge win-win opportunity here,” Ricker said.

Xcel modeling predicts “seasonal dispatch” could save it $35 million between 2020 and 2023 for the cost of fuel, plus another $13 million in savings for operations and maintenance costs and $7 million for capital construction expenses. It could also reduce carbon emissions by 5 million tons each year. The utility would still run its Sherco 1 and 3 plants year-round, though Xcel plans to stop burning coal altogether in the Upper Midwest by 2030. State data show coal burning in Minnesota was responsible for 27 million tons of greenhouse gas emissions in 2016.

Stephenson’s bill explicitly authorizes the PUC to approve a part-time coal plan if the proposal wouldn’t jeopardize reliable electric service or “unreasonably” increase electric rates. Rick Evans, the regional government affairs director for Xcel, told the committee they believe the PUC already has authority to approve seasonal use of coal plants, but the bill would ensure the PUC has the option in case it does lack the authority.

Evans said Xcel believes it can save money, maintain reliability and reduce carbon emissions with part-time coal but wants to try it out to see if reality matches with its modeling.

Stephenson’s bill also requires utilities to analyze the economic and environmental costs and benefits of operating nonrenewable energy plants on a seasonal basis. That research would be done as part of a 15-year plan that power companies file with the PUC every few years.

The PUC has already asked Minnesota’s three investor-owned utilities to review the possibility of running coal plants seasonally. Minnesota Power, which covers Duluth and northeast Minnesota, and Otter Tail Power, which serves a large swath of western Minnesota, told the Star Tribune in January they have no plans to switch coal generators to part-time status because doing so would threaten the reliability of electricity they produce.

Stephenson said his measure would extend to more utilities, including cooperative power services. “I think that all ratepayers in Minnesota should know that their utilities are making the same calculation (as Xcel) and have the tools available to them to save money,” he told the House panel.