Montana Dakota Utilities' plan to shutter a coal-fired power plant in Eastern Montana in 2020 drew criticism from public service commissioners Tuesday.
The closure of Lewis and Clark Station, announced by MDU in February as a cost-saving move, sparked concerns by Montana Public Service Commissioners that the utility was abandoning coal power too soon.
“You think the shutdown has to do with ‘MDU just doesn’t like coal?’ ” Commissioner Randy Pinocci asked MDU President Nicole Kivisto.
The question came as the PSC heard the utility’s case for increasing electricity rates in Montana by $9 million. Montana’s second largest monopoly utility, MDU plans to close Lewis and Clark near Sidney, and also two coal-fired units at Heskett Station in Mandan, North Dakota. Built in the 1950s, the power plants are becoming increasingly expensive to operate, Kivisto said at the Helena hearing. MDU plans to replace the coal power with a new gas-fired generator in Mandan and power bought on the open market. The electricity should cost customers half as much as electricity from Heskett and Lewis and Clark.
“We still have coal in our portfolio; Coyote and Big Storm are both coal facilities,” Kivisto said. “Even absent the retirement of (Heskett and Lewis and Clark), we still have a significant amount of our capacity in coal-fired facilities.”
MDU has about 26,000 electric customers in eastern Montana and has natural gas customers as far west as Billings.
Pinocci, who toured Lewis and Clark as a Republican PSC candidate last year, wasn’t finished. The crew at the plant told him Lewis and Clark, built in 1958, was running good as new as long as its worn-out parts were being replaced. The power was affordable enough.
“How does this compete with, say, solar? Does this coal-fired facility produce energy cheaper than, say, solar, that you may have at MDU. Do you know the answer to that?” Pinocci asked
“We don’t have solar at MDU,” Kivisto said.
“Would it be producing energy cheaper than, say, wind power?” Pinocci said. “Can it produce more competitively, the energy for customers compared to, say, wind. And keep in mind that we ask that the federal tax subsidy not be part of that decision. If the coal-fired plant can produce energy cheaper than solar, cheaper than wind. It’s on 24/7. I think in the past 30 years. I heard some astounding fact, like it was only down three or four times in that period. No wind turbine will ever hold that record. Does it compete and produce energy cheaper than wind?"
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The answer, Kivisto said, is that the coal-fired power plants are not competing either with electricity generated with natural gas, or market-priced power.
Fracking has dramatically increased natural gas supply and lowered prices. Natural gas surpassed coal as the nation’s top source of electricity generation. For a 12-month period ending in February, natural gas accounted for 35% percent of the nation’s electricity, according to the U.S. Energy Information Administration. Coal accounts for 27%.
The last year coal was the United States' dominant energy source was 2015, when it generated 33% of the nation’s electricity. Ten years ago, coal accounted for 44% of the nation’s electricity, EIA reports.
The other force driving down market power prices in MDU’s territory is MISO, or the Midcontinent Independent System Operator. MISO is the not-for-profit manager of transmission and electric generation in 15 states and parts of Canada. It balances energy flowing from renewable-, nuclear-, gas- and coal-driven sources. MISO’s prices are decreasing.
“We believe we would be rewarded at the end by shutting down these facilities because they aren’t as cost competitive as they used to be,” Kivisto told commissioners. “And what’s driving that? Increasing cost of fuel, increasing cost of transportation. And when you compare those increasing costs, and that has happened over time, when you compare that to the decreasing cost of the MISO market, because there’s been more wind energy added to MISO. But also, in addition to that, because of the low cost of gas, you have those two things competing. The cost of operating our facilities at Heskett and Lewis and Clark have been rising, while the MISO market has been declining.”
The decision to decommission Lewis and Clark came not long after the PSC approved more than $16 million in pollution controls at the power plant to comply with federal Mercury Air Toxics Standards, or MATS. The costs were passed on to customers.
Commissioner Tony O’Donnell, a Republican from Billings who serves Montanans as far east as Miles City, questioned whether money spent on upgrades and repairs at Lewis and Clark was wasted by the power plant's earlier-than-expected closure. At one point, MDU indicated the power plant would last another five years.
“I’m sure that any expenditure is meant to last a period of time for depreciation and whatever recovery of that,” O’Donnell said. “That money is now wasted.”
Kivisto said without the upgrades, Lewis and Clark and the Heskett units would have closed earlier than 2020. So long as the power plants are running, there are going to be costs associated with them, she said. The decision to close the plants and find power elsewhere did take into account the costs associated with keeping the units running.
“We’re comparing continuing to run these facilities with replacing them with another source. What we demonstrated is that it would be at half the cost to the customer,” Kivisto said.