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Law judge recommends against Minnesota Power investment in new gas plant

Minnesota Power Inc. stands by its long-term plan to own about half of a proposed natural gas-fired plant even though a state administrative law judge said the plan is not in the public interest.

In a July 2 recommendation to the Minnesota Public Utilities Commission, Administrative Law Judge Jeanne Cochran said Minnesota Power failed to show that owning 250 MW of the planned 525-MW to 550-MW Nemadji Trail Energy Center, or NTEC, in Douglas County, Wis., is "needed and reasonable." Cochran also found that Minnesota Power biased its analysis in favor of the combined-cycle plant and was inadequate in its consideration of alternatives. Cochran recommended that the five-member commission reject the ALLETE Inc. subsidiary's proposal.

Minnesota Power used the Strategist model to project long-term demand and supply. The utility's modeling had flawed assumptions and did not have a robust evaluation of alternatives, Cochran said.

"The fact that Strategist chose NTEC as the least-cost resource in the vast majority of runs conducted by the company is not persuasive because the company used a number of unreasonable assumptions in its modeling, failed to analyze a reasonable range of resources, and placed constraints on the model that resulted in its analysis being systematically biased in favor of NTEC and away from alternatives," Cochran wrote.

The Minnesota Department of Commerce's own modeling of Minnesota Power's resource needs supported the gas plant, but the law judge appeared sympathetic to clean energy groups, whose modeling showed that a combination of energy efficiency and demand response resources, which can trim demand during peak times, avoid the need for more gas capacity. The groups include the Minnesota Center for Environmental Advocacy and the Sierra Club, Fresh Energy and Wind on the Wires.

A Minnesota Power representative, in a July 5 statement, said the "ALJ's recommendation is contrary to what the Minnesota Department of Commerce recommended in May that the PUC approve the agreements." The Duluth, Minn.-headquartered utility will continue to review Cochran's report and recommendation through the week of July 9, according to a July 5 statement.

Despite the law judge's recommendation, Minnesota Power remains committed to its long-term power supply plan called EnergyForward that aims to replace coal generation with a mix of gas and renewable capacity. "With the addition of the Nemadji Trail Energy Center, we are confident we will reach 44% renewable energy by 2025," the representative said.

Cochran's recommendation has "no legal effect unless expressly adopted by the commission as its final order," according to a notice included within it. The commission can accept, modify or reject the law judge's advice.

Minnesota Power in July 2017 submitted its EnergyForward package that proposed a combination of 10 MW of solar, 250 MW of new wind and about 250 MW of dispatchable natural gas to meet a projected capacity deficit of about 500 MW by 2031. The proposal would help the utility comply with a 2016 commission order to consider energy supply resources such as solar and wind. The state also requires investor-owned utilities to have at least 26.5% of their energy sales by 2025 come from qualified renewables.

Under the package, Minnesota Power affiliate South Shore Energy agreed to jointly own the Nemadji Trail Energy Center with Dairyland Power Cooperative In its petition, Minnesota Power staff said owning part of the Nemadji plant was the least-cost option picked under a competitive solicitation and that the capacity is needed to replace about 700 MW of coal generation coming offline between 2013 and 2026 and support the growing amount of renewables added to its energy mix. (Minnesota PUC Docket No. 17-568)