December 8, 2006
Debate in Minnesota Over Proposed Coal Plant Is National Test Case
Utilities Ignoring Future Costs of Global Warming Pollution
CAMBRIDGE, Mass. - Testimony submitted on behalf of the Union of Concerned Scientists (UCS) and a coalition of Minnesota groups will be considered at hearings next week before the Minnesota Public Utilities Commission in what has become a national test case of whether state regulators will allow utilities to build new coal plants despite the financial risks to ratepayers and investors arising from increased global warming pollution.
At issue is whether the Commission will approve construction of transmission lines associated with the Big Stone II coal plant, proposed to be built across the border in South Dakota but mainly intended to serve Minnesota consumers. The project cannot be built unless the seven utilities seeking to build it prove to the Commission that it is more cost-effective than efficiency investments or renewable energy technologies like wind power. Thus far, the Big Stone II utilities – like many utilities in the nation – have ignored the substantial financial risks associated with greatly increasing global warming emissions. The testimony shows that the cost of Big Stone II could increase by 27-33 percent, or $95 million per year on average, when mid-range costs of expected federal carbon dioxide regulations are included.
"Utilities are betting billions of dollars of ratepayer money on the reckless assumption that Big Stone II would be allowed to pollute for free for the several decades it would operate," said Steve Clemmer, Clean Energy Research Director for UCS. "Building a major new source of global warming pollution like Big Stone II isn't just an environmental mistake, it's a financial mistake."
The Big Stone II proceeding is thought to be the first time in the nation that state regulators have had to decide whether a proposed coal plant is cost effective after plant opponents have presented a thorough analysis of the likely financial impact of global warming laws on the plant. If the Minnesota Commission finds that the plant is not cost-effective given likely future climate laws, it could have a major impact on many of the over 150 other coal plants proposed in other states.
"If Minnesota regulators find that Big Stone II doesn't make economic sense when future climate laws are factored in, it will be an important national precedent," said Barbara Freese, a consultant for UCS in Minnesota and a former Minnesota assistant attorney general. "It will signal that global warming is a problem U.S. utilities can no longer ignore."
According to the testimony, conventional coal plants like Big Stone II will be the first target of federal global warming laws, and rightly so. Coal plants are America's top source of heat-trapping CO2, emitting more than all cars, trucks, buses, planes, and trains combined. Big Stone II alone would emit roughly as much global warming pollution as 700,000 cars, but unlike cars, it will operate for decades.
The testimony also shows that the utilities significantly underestimated the potential for energy efficiency, wind power, and other cleaner alternatives that could cost-effectively displace the need for the proposed coal plant.
The testimony was submitted by expert witnesses from Synapse Energy Economics on behalf of UCS, Fresh Energy, Izaak Walton League of America—Midwest Office, Wind on the Wires, and the Minnesota Center for Environmental Advocacy. It follows on a related report recently released by UCS that explains why future climate laws are likely to be adopted in the next few years and quantifies the financial implications for coal plants. The report finds that the relative cost impact of expected regulations on global warming emissions on new coal plants ranges from 17-62% percent.
The Union of Concerned Scientists is the leading U.S. science-based nonprofit organization working for a healthy environment and a safer world. Founded in 1969, UCS is headquartered in Cambridge, Massachusetts, and also has offices in Berkeley, Chicago and Washington, D.C.
