Minn. PUC aligns carbon cost with Clean Power Plan

By Jeffrey Tomich | 07/01/2016 07:00 AM EDT

Minnesota utility regulators will push back by three years the date when utilities must factor into their long-range plans the cost of complying with carbon dioxide regulations.

Minnesota utility regulators will push back by three years the date when utilities must factor into their long-range plans the cost of complying with carbon dioxide regulations.

Commissioners voted unanimously to delay the date until 2022 to line up with the earliest implementation date for U.S. EPA’s Clean Power Plan.

A 2007 state law requires the Minnesota Public Utilities Commission to establish a likely range of costs of future CO2 regulations on electric generation. The costs are included in annual integrated resource plans filed with the commission every year or two years.


The cost estimate helps influence decisions about what type of generation a utility builds or buys, or when to retire older power plants.

The regulatory cost values discussed by the commission at its meeting yesterday — estimates of what it will cost utilities to comply with CO2 regulations — are different than externality values that are meant to reflect the broader cost to society of CO2 emissions and climate change. Those costs are the subject of a different proceeding at the PUC.

The regulatory cost value for power plant CO2 emissions was initially adopted in 2007 and updated in 2009 to $9 to $34 a ton.

The PUC left the CO2 values unchanged yesterday. The commission, however, moved back the date on which the values should begin to be applied.

State agencies that advise the commission, clean energy groups and utilities agreed 2022 was an appropriate start date to apply regulatory values for CO2.

"We think it’s possible that at this time in 2017 there will be more information from the ongoing legal proceedings about the Clean Power Plan that could inform whether 2022 is the appropriate first application date," said Jim Denniston, assistant general counsel for Xcel Energy Inc.

"We don’t know if the 2022 start of the Clean Power Plan would change, but it’s possible there would be more information about that."

Commissioner Nancy Lange agreed, and said it’s yet unclear how significant those CO2 values will be in influencing utility investment decisions.

"The modeling that’s coming out around the Clean Power Plan is showing that in many cases the Clean Power Plan isn’t even the controlling force of carbon," she said. "It’s other forces in the electric utility industry. We may have a regulatory cost of zero."

Externality request denied

The commission denied a request by clean energy advocates to initiate a separate proceeding to examine the relationship between the regulatory costs of CO2 emissions and the externality value of CO2 emissions.

Currently, utilities are required to apply externality values in their integrated resource plans for CO2 emissions before 2022 and apply the regulatory value for emissions in 2022 and beyond.

The clean energy groups — Fresh Energy, Minnesota Center for Environmental Advocacy, Sierra Club and Wind on the Wires — said the Clean Power Plan will reduce CO2 emissions, but it won’t eliminate them, so it’s appropriate to study and reconcile the relationship between the two values.

Commissioners, however, agreed with the Minnesota Department of Commerce position that it’s premature to begin another proceeding while the externality value has yet to be decided. Also, the department noted that both it and the PUC already face an "unprecedented workload."

In April, a Minnesota judge recommended that the PUC apply the federal "social cost of carbon" calculation to determine how new energy projects affect the environmental health and well-being of the state (ClimateWire, April 19).

It is up to the PUC to accept or reject the judge’s nonbinding opinion, which would require utilities to factor in costs of $11 to $57 per ton of CO2 emitted.

This story also appears in ClimateWire.