Legalectric

Notice they’re not running OVER opposition! Yup, that’s as it should be!

And there goes Micheletti again, “They are not to be believed.” Uh-huh! Right…

Excelsior Energy runs into opposition

Peter Passi
Duluth News Tribune – 12/20/2006

Excelsior Energy Inc.â??s plans to build an Iron Range power plant burning gasified coal have received a chilly reception from Minnesotaâ??s two largest investor-owned utility companies.

Both Minnesota Power and Xcel Energy Inc. view the project as unneeded and warn that its construction could drive their customersâ?? electric rates higher.

Tom Micheletti, Excelsiorâ??s co-president, contends the incumbent power companies are distorting the facts and resorting to scare tactics in an effort to stifle new and innovative competition.

â??They are not to be believed,â? Micheletti said. â??They want to block competition and stop innovation, and theyâ??re especially fearful of someone with a better, lower-cost product. Theyâ??re simply not being truthful about the costs.â?

But Margaret Hodnik, Minnesota Powerâ??s director of regulatory and public affairs, said the development of Excelsiorâ??s project would have an indisputably negative effect on her companyâ??s customers, including large industrial clients. She said Minnesota Power would be compelled to pick up about $80 million of the projected $250 million tab associated with new electrical transmission to support Excelsior. Minnesota Power, in turn, would have little choice but to pass along the cost to customers, resulting in nearly a 3 percent jump in rates.

The cost of transmission improvements are borne by all utilities that regulators deem beneficiaries of the work. But Hodnik said Minnesota Power already has a robust electrical grid and added, â??If we needed those improvements in our system, we would make them ourselves.â?

Xcel Energyâ??s customers could see even steeper rate hikes. Judy Poferl, Xcelâ??s director of regulatory administration, said her companyâ??s computer models project an 8 percent to12 percent increase in rates would be necessary to cover expenses related to Excelsior, if it is built.

Micheletti questions those numbers, however. He said Xcel has refused to subject its computer modeling to proper scrutiny, calling its software proprietary. He said the modeling can easily be manipulated to achieve a desired outcome.

Tom Osteraas, an attorney for Excelsior, also contends Excel has considerably understated the alternative costs of building a modern, conventional coal plant. In reality, he said gasified-coal technology is quite cost-competitive.

The Minnesota Public Utilities Commission must decide whether Xcel should be compelled to buy power from Excelsior via a purchase agreement. An administrative judge is considering the matter and is expected to issue a recommendation in February. That recommendation will then go before the full commission for final action.

Excelsior probably wonâ??t be built unless it wins a purchase agreement with Xcel. The proposed plant would employ an estimated 1,000 people during its construction and about 100 people on a permanent basis when it begins to operate.

Poferl said getting a handle on the probable costs of doing business with Excelsior has been challenging.

â??Because of substantial uncertainties in the proposed contract and their filings, we have argued that the commission should find they havenâ??t proven this project is in the public interest,â? Poferl said.

She noted that Excelsior lacks any long-term contracts with a coal producer or a railroad to supply its facility with fuel, making its operating costs difficult to forecast.

Micheletti said Excelsior would be foolish to lock itself into a single supplier, because the flexibility of its proposed power plant to use multiple fuels â?? including eastern and western coal as well as petroleum coke â?? is one of its competitive advantages.

Excelsior wants to build a $1.5 billion, 600-megawatt power plant on the outskirts of Taconite and have it operating by 2011. Excelsior also proposes to bring a second 600-megawatt unit online by 2013.

But Xcel predicts it will only need 511 megawatts of additional power generation by 2015.

Hodnik said it would be bad policy for the Public Utilities Commission to disregard Xcelâ??s resource plan and force excess capacity upon the company.

But Micheletti claims Xcel is deliberately lowballing its energy needs to block the Excelsior development. He said the companyâ??s behavior fits a pattern of obstruction.

Micheletti cited recent testimony by Jim Chen, the University of Minnesota Law Schoolâ??s associate dean, before the PUC.

â??Incumbent utility companies and their shareholders have an overwhelming incentive to maintain their monopolistic grip on all aspects of the electrical industry, including the structurally competitive generation sector,â? Chen said. â??Like any other incumbent, Xcel Energy will stop at nothing to prevent new baseload from being provided by an independent power company.â?

Although the gasified-coal plant Excelsior has proposed compares favorably to conventional power plants when it comes to emissions, the projectâ??s opponents have raised pollution as a concern, too.

Hodnik pointed out that several large industrial projects for the Northland are in the works, such as the proposed Minnesota Steel mill in Itasca County, the Polymet copper mine near Hoyt Lakes and the Blandin mill expansion in Grand Rapids

â??Only so much air increment is available for permitting,â? said Hodnik, noting, â??Other projects may be more naturally suited to be built in northern Minnesota, because they would use ore or wood from the area, rather than coal from 1,000 miles away.â?

Micheletti said he finds it hypocritical for Minnesota Power to level environmental criticism, calling the company â??the biggest polluter in northeast Minnesota.â?

Micheletti said he believes Excelsior eventually will be able to capture and sequester virtually all its emissions. He said plans are being developed to pipe the plantâ??s gases to places where it can be stored underground, such as North Dakota. Such a feat initially was estimated to cost about $1 billion, but Micheletti now believes it might be done for considerably less.