15-2500-15301-2 IP-6202/CN-02-2006

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE PUBLIC UTILITIES COMMISSION

 

 

In the Matter of the Application of Faribault Energy Park, LLC for a Certificate of Need for a 250-Megawatt Electric Generating Facility

FINDINGS OF FACT, CONCLUSIONS OF LAW AND RECOMMENDATION

 

          A hearing was held before Beverly Jones Heydinger, Administrative Law Judge, on April 30, 2003 at City Council Chambers, Faribault, MN.  It included both public and evidentiary portions.

James D. Larson, Vice President, Faribault Energy Park, LLC, 200 South 6^th Street, Suite 300, Minneapolis, MN 55402, appeared on behalf of Faribault Energy Park, LLC (“Applicant” or “FEP”).  Priti R. Patel, Assistant Attorney General, 525 Park St., Suite 200, St. Paul, MN 55103, appeared on behalf of the Department of Commerce (“Department”).  Alan Mitchell and William Cole Storm, Environmental Quality Board (“EQB”), 658 Cedar Street, Room 300, St. Paul, MN 55155 appeared on behalf of the Minnesota Environmental Quality Board Staff. Also present was Clark Kaml, staff member, serving as public advisor, Public Utilities Commission, Suite 350, 121 Seventh Place East, St. Paul, MN 55101-2147.

The last post-hearing submission, the Final Environmental Report, was filed on May 9, 2003.

 

STATEMENT OF ISSUE

Should the Public Utilities Commission grant a certificate of need to the Applicant for a 250-Megawatt Electric Generating Facility?

RECOMMENDATION

IT IS HEREBY RECOMMENDED that the Public Utilities Commission grant the certificate of need.

FINDINGS OF FACT

Parties

 

1.                 The Applicant, Faribault Energy Park, LLC, is a limited liability corporation owned by the Minnesota Municipal Power Agency (MMPA).[1]   The MMPA is a Minnesota municipal corporation and political subdivision of the State of Minnesota.  There are eight member cities:  Anoka, Arlington, Brownton, Chaska, LeSueur, North St. Paul, Olivia and Worthington.  It has an aggregate peak load (excluding reserve requirements) of 180 MW.  The eight cities serve a retail customer base of approximately 40,000 and a population of approximately 85,000.  MMPA also serves two non-member municipal utility customers (East Grand Forks and Shakopee) and part of a cooperative load (Steele-Waseca Cooperative Electric).  These three additional customers have an aggregate peak demand of 80 MW.  MMPA currently purchases a majority of its electricity from other suppliers.[2]

2.                 The EQB is the state agency responsible for the siting of electric generating facilities.  The EQB has an interest in assuring that all environmental aspects of the size, type, and timing of the proposed facility are fully developed in this proceeding since those issues may not be considered by the EQB during the siting process.[3]  The EQB may present its position regarding need and participate in the public hearing process prior to the issuance or denial of a certificate of need.[4]  The primary purpose for intervention by the EQB staff was to assure full development of the record of the environmental impact of the proposed facility.

3.                 The Department is authorized by statute to participate in matters before the Public Utilities Commission (“PUC" or “Commission”) involving utility rates and adequacy of utility services and to intervene in certificate of need proceedings.[5]  It is the state agency responsible for investigating the facts set forth in the Applicant’s Certificate of Need application and providing the Commission sufficient information and recommendations so it can make a final determination on the application.[6]  Also, the Commission ordered the Department to prepare the required Environmental Report.[7]

Procedural Summary

4.                 On November 19, 2002, FEP filed an application with the Commission under Minn. Stat. § 216B.243 and Minnesota Rules, Chapter 7849, for a certificate of need to construct a 250-megawatt electric generating facility.[8]

5.                 In response to the Application, on November 20, 2002, the Commission issued its Notice of Comment Periods on Substantial Completeness.[9]

6.                 The Department and EQB submitted comments on completeness,[10] and thereafter, FEP submitted reply comments including additional and supplemental information.[11]

7.                 On January 27, 2003, the PUC issued an order finding that FEP’s application was substantially complete, requiring a contested case proceeding on the merits of FEP’s filing, and referring the matter to the Office of Administrative Hearings for that hearing.[12]

8.                 On March 28, 2003, FEP filed a supplement to its application.[13] 

9.                 On February 14, 2003, the First Prehearing Conference was held in St. Paul, MN.

10.             On February 25, 2003, the ALJ issued the First Prehearing Order, establishing a schedule and procedures.

11.             On April 11, 2003, a Second Prehearing Conference was held in St. Paul, MN.

12.             On March 28, 2003, FEP filed a Supplement to its Application.[14]

13.             Notice of the Hearing was published in the Minneapolis Star Tribune, the St. Paul Pioneer Press, and the Faribault Daily News on March 28, 2003.  It was also published in the EQB Monitor, Vol. 27, No.3, March 31, 2003.[15]  The publication included notice of how to obtain the Draft Environmental Report. 
Additional notice of the hearing was mailed to approximately 100 neighboring landowners and residents.[16]

14.             As set forth in the published notice, the public hearings were conducted on April 30, 2003, at 2:00 p.m. and 7:00 p.m. at the City Council Chambers, 208 First Avenue Northwest, Faribault, MN. 

15.             Two members of the public spoke at the afternoon hearing.[17]  Following the conclusion of the public hearing at 2:00 p.m., the evidentiary hearing was held and completed.  Four members of the public spoke at the evening hearing.[18]

16.             The Final Environmental Report (the Draft Report, Comments and Response) was filed with the administrative law judge on May 9, 2003.

17.             There were no written comments from the public filed with the administrative law judge. The final posthearing submission was filed on May 9, 2003.

Position of the Parties

18.             Faribault Energy Park and the Department entered into a Joint Stipulation and Agreement dated April 2, 2003, that the Applicant had satisfied the statutory and rule requirements to justify the issuance of a certificate of need.[19]

19.             The EQB  took no position on whether the certificate of need should be granted.

The Application

 

20.       FEP proposes a 250-megawatt, natural gas-fired electric energy generating facility  (“Facility”) to be constructed near Faribault, MN, to serve customers of the municipal utilities that are members of MMPA.  The proposed facility qualifies as a “large energy generating facility”[20] and is subject to review under the criteria set forth in Minn. Stat. § 216B.243 and Minn. Rules 7849.0010 through 7849.0400.

 

21.             The Facility will generate electricity using a combustion turbine and heat recovery steam turbine generator operating in combined-cycle mode.  Operation in combined-cycle mode is a more efficient form of electric generation than traditional simple-cycle combustion turbine methods.  The combined nominal net electric generating capacity of the entire plant is 250 MW, based upon a 150 MW combustion turbine and a 100 MW heat recovery steam generator.  The project is designed to provide a dedicated source of electricity to help meet intermediate electricity needs during medium to high load periods.  The Facility is designed to interconnect with a major transmission line, the Lake Marion – West Faribault 115kV line, which runs near the Project’s proposed site.[21]

 

22.             The Facility will use natural gas as a primary fuel and low sulfur No. 2 fuel oil as a backup fuel.  The natural gas will be transported to the site via the Northern Natural Gas (NNG) system in southern Minnesota.  NNG’s mainline, two 30” pipes, traverses the Facility’s property, and a new ¼-mile, 16-inch line off the mainline will be routed to the plant site completely within plant property.  Natural gas is projected to be available over the 30-year life of the Facility and service to the Facility will be secured through agreements with natural gas suppliers.  In addition, above-ground steel storage tanks will be built to hold 700,000 gallons of No. 2 fuel oil, representing approximately 72 operation-hours of fuel in the event of an interruption in the natural gas supply.  Fuel oil will be transported to the Facility by tanker trucks or by rail.  For the initial filling of the storage tanks, the oil will be shipped from a regional source.[22]

 

23.      In selecting a proposed location, the Applicant looked for proximity to an adequate supply of natural gas and to availability of existing transmission capacity.[23]  Much of the generation serving Minnesota comes from the north and west of the Twin Cities.  The Facility’s proposed location south of the Twin Cities will help to mitigate some of the transmission constraints that impede regional and inter-regional transactions.  This project will improve the reliability of the regional transmission system by reducing possible overloads of nearby transmission facilities that can presently occur during high-load conditions and facility outages.  For instance, the proposed facility may counteract the prevailing flow and reduce loading on the Mid-Continent Area Power Pool (MAPP)-defined constrained interfaces in southern Minnesota, central Wisconsin, and North Dakota.[24]  The overall performance of the integrated transmission system with the proposed facility is designed to meet or exceed the North American Electric Reliability Council (NERC) and MAPP reliability criteria.

Criteria to Evaluate Need for the Proposed Generating Facility

 

24.             The criteria for evaluating an application for a certificate of need are set forth at Minn. Stat. § 216B.243, and elaborated at Minn. R. 7849.0120.  Each of the rule criteria is addressed below.  A Certificate of Need can be issued only if the probable result of denial would be an adverse effect upon the future adequacy, reliability, or efficiency of energy supply to the applicant, to the applicant’s customers, or to the people of Minnesota and neighboring states.  The factors to be considered in assessing adequacy, reliability, and efficiency of energy supply are:

(1)       the accuracy of the applicant’s forecast of demand;

(2)       the effects of conservation programs;

(3)              the effects of promotional practices;

(4)              the potential for facilities not requiring certificates of need to meet the future demand; and

(5)              making efficient use of resources.[25]

 

A (1).  Accuracy of the Applicant’s Forecast of Demand for the Type of Energy that Would Be Supplied by the Proposed Facility.

 

25.             MAPP is the Upper Midwest region’s reliability organization.  The July 31, 2002 MAPP Load and Capability Report compiles the MAPP-member load forecasts, existing resource capabilities, and projected resource additions in order to calculate the regional electric generation capacity.  The report indicates that MAPP members need to build additional capacity.  Under the minimum reserve requirements of the MAPP pool, deficits are indicated from summer 2005 onward for the portion of MAPP in the United States (MAPP-US).  Increased capacity will be needed to maintain sufficient reserve levels to ensure a safe, reliable system.

26.             Carol Overland questioned the projected reserve margins published by NERC.  NERC’s 2002-2011 Reliability Assessment reports the reserve margin for Summer-2002 for MAPP-US at 24.5 percent, and Winter–2002/03 at 40.5 percent.[26]  However, the reported reserve margin for Summer-2006 when this facility is projected to come on line is 8.4 percent, which is below the 15 percent reserve margin required by MAPP.[27]

27.             The MAPP 2002 Load and Capability Report forecasts a deficit starting in the summer of 2005 that grows to 492 MW by the summer of 2006 and reaches 2,567 MW by the summer of 2011 for the MAPP-US region.  The MAPP data show that the regional deficit is increasing an average of 400 MW per year.  The same data show the MAPP-US regional load is growing an average of 600 MW per year.  In spite of recent committed or planned resources, additional plants are needed in the near future.  Of particular note is the nearly 1,200 MW projected drop in reserve margin for the MAPP-US region between 2004 and 2006, when the proposed Facility would begin to operate.[28]

28.               MMPA predicts its demand will grow approximately 3.75 percent annually.  From 1992 to 2001, its annual growth rate in peak electric demand varied from –7.1% to 10.7%.  MMPA’s membership includes many rapidly growing communities that are likely to sustain or exceed its average historical growth level. [29]  Its anticipated capacity deficiency in 2006 is 113 MW.[30]

29.             MMPA has a large capacity and energy need commencing in 2006 as the result of both load growth and the expiration of capacity purchases that have been needed to meet existing peak demand.  As MAPP reserve margins shrink, MAPP members may be less willing to sell existing capacity.  Prices quoted to MMPA for new capacity are high as a result of uncertainties of siting, equipment availability, and financing.[31]

30.             Based on the record as a whole, the Administrative Law Judge finds that a dual need for both additional capacity and energy exists in the MAPP-US region.  The MAPP-US reserve capacity will be deficient by almost 500 MW in 2006.  The proposed Facility can help meet that need.  MMPA also has a need for new intermediate capacity by 2006.  Expected MMPA load growth and expiration of existing capacity purchases justify a minimum of 113 MW of the project beginning in 2006. The remainder of the plant is needed to address MMPA’s future growth, and MAPP-US’s projected summer season reserve deficits (due to sales to other utilities).[32]

A (2).  Effects of the Applicant’s Existing or Expected Conservation Programs and State and Federal Conservation Programs.

31.             Conservation programs, such as new or expanded Demand Side Management (DSM) programs, are unlikely to provide a timely, cost-effective substitute for the type and quantity of electric capacity or energy provided by the proposed Facility.  It takes many years for DSM programs to deliver maximum results.[33]

32.             MMPA reduced the 2001 summer peak load by over 8.3 MW (about 4 percent) using cost-effective DSM programs.  Load control programs make up the largest share of the DSM programs and include cycle air conditioner, C & I interruptible (potentially with backup distributed generation), and peak shave water heaters.  These load management programs have deferred the need to add peak capacity.  While continuing expansion of the load management program is expected, it is not likely to provide over 100 MW of additional capacity by the summer of 2006.  Limiting factors include customer receptivity and the potential for secondary peaks that are higher than the original peaks due to reduced system load diversity.  MMPA’s summer peak hourly load-shape has flattened due to the implementation of DSM. This flattening increases the number of control hours needed to achieve increased levels of demand reduction.[34]

33.             FEP has consistently exceeded its energy saving goals.  No party presented evidence that conservation practices could meet the need for increased generating capacity, and the Administrative Law Judge finds that the need cannot be met by existing or expected conservation practices or programs.

 

A (3).  Effects of the Applicant’s Promotional Practices.

34.             FEP has not engaged in promotional practices that have increased the demand for electricity.  MMPA has not conducted any promotional activities that have measurably contributed to the need for the Facility or increased demand for wholesale power in the region.[35] 

 

A (4).  Ability of Facilities that Do Not Require Certificates of Need To Meet the Future Demand.

35.      The primary alternatives to the Facility that would not require certificates of need are power purchases from existing facilities, purchases from plant facilities outside Minnesota, or construction of Minnesota facilities that are small enough not to require certificates of need (less than 50 MW).  MAPP-US forecasts indicate that existing and known new facilities will not be able to meet forecasted requirements beginning in 2005.  Continued purchases from existing facilities within the MAPP-US region are no longer possible at competitive, stable prices.  In addition, purchases from new or existing generating facilities outside Minnesota would likely require new transmission infrastructure.  Several new facilities below 50 MW would be required to meet the needs of MMPA and the region.[36]

A (5).  The Effect of the Proposed Facility, or a Suitable Modification, To Use Resources Efficiently.

36.      The Facility makes efficient use of existing resources.  If the proposed siting is approved by the EQB, the Facility will use the existing 115 kV transmission line owned by Northern States Power Company d/b/a Xcel Energy (“Xcel”).  In addition, the project will use the existing pipeline owned by NNG as the primary source of natural gas.  In both cases it is expected that little new infrastructure will be required for interconnection.  The Applicant expects that locating new generation south of the Twin Cities should help balance the electrical system and may reduce loading on the MAPP-defined constrained interfaces in southern Minnesota, central Wisconsin, and North Dakota.[37]

37.      If the proposed site is approved, the primary fuel, natural gas, will be delivered through the existing NNG mainline.  The backup fuel, No. 2 fuel oil, will be used if natural gas suppliers are unable to provide natural gas during an emergency.  The water will be drawn from the underlying Jordan bedrock aquifer.  Wastewater will be treated at the Facility and discharged into a wetland created by the Applicant for that purpose.[38]

38.      The Department analyzed the effect of the proposed project on the reliability of the natural gas supply system, which is used both as a direct source of energy and as a fuel to produce electricity.  The Facility would be located on a portion of NNG’s mainline where capacity is not constrained.  Specifically the Facility is planned to be adjacent to NNG’s mainline in Faribault, Minnesota and south (upstream) of Farmington, Minnesota, traditionally a bottleneck of natural gas into the metro area.  Thus, the Facility will not decrease the reliability of gas flowing to any of NNG’s branch lines or into the metro area.[39]      

39.      The proposed facility will consume the maximum amount of natural gas during peak summertime demand.  Sufficient excess natural gas is available then because gas consumption peaks in the winter and the supply system is designed for the wintertime peak.  Thus, the facility’s needs will be highest when excess supply is expected to be available.[40]

A More Reasonable and Prudent Alternative Has Not Been Demonstrated

40.      The record must be analyzed to determine if there is a more reasonable and prudent alternative to the Applicant’s preferred option.[41]

41.      As part of its review, the Department evaluated the possibility of generating power by means of renewable energy resources, and whether the proposed Facility is less expensive (including environmental costs) than power generated by a renewable resource.[42]  As required by statute, it considered hydropower, wind, solar, geothermal and biomass as renewable energy resources.[43]

42.     The Department concluded that no renewable resource could reasonably meet the project objectives which include:

(a)       Suitability for operating at a 75 percent capacity factor;

(a)            Availability of the alternative in the time frame required to meet MMPA’s need;

(b)            High, year-round availability and starting reliability;

(c)            Engineering efficiency (i.e. the heat rate);

(d)            Cost effectiveness;

(e)            Limited environmental impact (including externalities); and

(f)              Limiting the risk to MMPA from financial, social, and technological factors that MMPA and its member-owners cannot control.[44]

43.      Although no renewable alternative can reasonably meet the project objectives, the Applicant undertook a general cost analysis of the renewable alternatives. 

44.      Hydropower fails to meet reasonable project objectives.  It typically serves baseload rather than the intermediate load required by MMPA.  The initial capital costs are quite high compared with intermediate resources.  MMPA is in the process of developing two small hydro plants in the northern metro-area suburbs but these plants are not sufficient to meet all MMPA’s needs.[45]

45.      There are substantial potential hydro resources in Manitoba, Canada, but adequate transmission capability from Manitoba is not available.  Current transport capacity from Manitoba to Minnesota of 1,975 MW is already in use.  Any new Canadian hydropower project would require at least an estimated $180 to $200 million of additional transmission investment.  In addition, because of the lead time, a large hydropower project with a new transmission line could not come on line by 2006.  Thus, hydropower cannot meet the necessary time frame, and would not be cost-effective.[46]

46.      Wind energy is low cost and is perceived to have unlimited supply.  Turbines are increasingly reliable and the costs of wind generation are decreasing.   However, wind generation alone is not an effective resource to meet intermediate resource needs because the wind does not blow continually and there is a low correlation between wind output and summer peaking conditions.  MAPP accredits capacity to account for the intermittent nature of wind.  The accredited value for wind is the median of all the hourly output from the plant over a four-hour period that includes the expected peak hour.  Using an estimate of about 17 percent accreditation, 6 MW of nameplate wind generation would need to be installed to receive 1 accredited MW of capacity.  Therefore, almost 1,500 MW of nameplate wind capacity would be needed to attain 250 MW of accredited capacity.  It would take an extended period of time to site and construct such a large amount of wind capacity.  Such broadly distributed generation may also require additional expense for transmission.  Due to its intermittency, wind is not a reasonable alternative.[47]

47.      One commenter suggested that the size of the facility be scaled back and supplemented by wind generation.  However, a significantly smaller facility would not be cost-efficient.[48]

48.      Solar energy is another intermittent resource.  There is less experience with solar generation in this region than with wind.  Under the MAPP-capacity accreditation process, solar also receives a relatively low ratio of accredited capacity to nameplate rating, requiring substantially greater amounts of solar capacity to meet this project’s capacity objectives.  Solar, like wind, fails to meet the primary project objectives and is not a reasonable alternative.[49]

49.      Solid biomass fuels include wood and waste wood, switchgrass and alfalfa stems.  Ethanol derived from corn is also considered a renewable fuel.   Renewable fuels may be used via burning in a steam cycle, gasified for use in a combustion turbine, or burned in a combustion turbine or other internal combustion device.    Having 250 MW of solid fuel biomass capacity by 2006 is unlikely due to fuel availability, cost, and siting issues.  Accordingly, biomass is not a reasonable alternative.[50]

50.      MMPA examined other alternatives to the project, including landfill gas, fuel cells, micro-turbines, pumped storage hydroelectric, compressed air energy storage, battery energy storage, fly wheel energy storage, and superconducting magnets.  None of the alternatives is appropriate to meet the project objectives because they are not commercially available on the scale of the project, they would not be cost-effective, or suitable sites are not available.  The Applicant has adequately explored the alternative of generating power by means of renewable resources.[51]  The proposed project is less expensive, including environmental costs, than power generated by reasonably available renewable energy sources.[52]

B (1).  The Appropriateness of the Size, Type and Timing of the Proposed Facility, Relative to Reasonable Alternatives.

51.     A Certificate of Need can be issued only if a more reasonable and prudent alternative to the proposed Facility has not been demonstrated by a preponderance of the evidence on the record. The factors to be considered in assessing alternatives are:

(a)            Appropriateness of the size, type and timing of the proposed Facility;

(b)            Cost of the proposed Facility and cost of the energy to be supplied by the Facility;

(c)            Effects on the natural and socioeconomic environments; and

(d)            Reliability. [53]

52.     In addition to the renewable resources above, the alternatives examined by the Applicant included additional conservation, load management, and the following non-renewable alternatives:

(a)      A fuel-oil fired, combined-cycle combustion turbine facility;

(b)            A natural gas-fired, simple-cycle combustion turbine facility;

(c)            A coal-fired facility;

(d)            Purchased power.[54]

53.      The proposed 250 MW facility is intended to meet the Applicant’s and the region’s need for intermediate capacity and energy beginning in the summer of 2006.  An acceptable alternative must be available by the summer of 2006, and must offer comparable efficiency, capacity and reliability.[55]  If the project were delayed, it could affect the region’s power supply security, increase the use of less efficient or less environmentally preferred peaking facilities, and reduce electric system reliability.[56] 

54.      A fuel oil-fired combustion turbine (combined cycle) would be similar to the proposed project, except No. 2 fuel oil would be the primary fuel.  No back-up fuel would be needed since on-site oil storage tanks would be used to provide the required fuel.  The same units described in section 4 of the application would be used, thus requiring the same amount of land, and workers for construction and operation.    Discharges, solid wastes, noise, traffic and transmission facilities would be identical to the proposed facility.  This alternative would be expected to operate at the same level of availability as the proposed facility.  It would be easier to site this alternative because it would not require proximity to a natural gas pipeline.  The disadvantage of this option is that turbines burning fuel oil produce higher emissions of sulfur dioxide, carbon monoxide, and nitrogen oxides than a natural gas-fire alternative.  Operating costs are higher when fuel oil is burned, thus there is less energy produced for the same cost when compared to the proposed facility.  This alternative is less cost effective and has greater environmental costs.[57]

55.      The Applicant also considered a natural gas-fired, simple-cycle combustion turbine facility.  Discharges, solid wastes, noise, traffic and necessary transmission facilities would be identical to the proposed project.  It would require the same number of construction workers but only three workers to operate the facility.  It would require five acres less land.  Vehicular and rail traffic would be the same as for the proposed facility.  A simple-cycle combustion turbine facility would be able to operate with the same availability as the proposed facility.  The major drawback of this alternative is the dramatic loss of efficiency, thus decreasing the capacity below the objectives of the project.  In addition, the amount of air emissions per unit of energy would be greater than the proposed facility.[58]

56.      A coal-fired facility was also considered.  It is not well-suited for meeting intermediate resource needs.  Coal-fired facilities are ordinarily associated with baseload resources due to high capital costs, slower start-up times, and lengthy construction times.  Coal-fired facilities typically have greater air emissions as well.  Therefore, this alternative was excluded from further consideration.[59]

57.      Recent proposals received by the Applicant to purchase long-term power supply have demonstrated limited quantities of capacity resources being offered at prices higher than the cost of building this project.  Given the projected deficit of 492 MW in the summer of 2006 in the MAPP region, it is unlikely that purchased power will be available at a reasonable cost.  Therefore this alternative was excluded from further consideration.[60]

B (2).  The Cost of the Proposed Facility and the Energy Supplied by It, Relative to Reasonable Alternative.

58.     The combined capacity and energy costs of the proposed natural gas-fired combined cycle facility are lower than any of the other fossil fuel alternatives.[61]

59.     The Applicant has anticipated that the cost of natural gas may rise, but the plant’s high efficiency and the cost of natural gas relative to other fossil fuels will support the cost-effectiveness of the proposed facility.[62]  The Facility is not expected to significantly affect the cost or availability of natural gas to other natural gas customers.[63]

60.     A smaller combustion turbine would have increased energy unit costs because the capital cost per unit of capacity generally increases as the total turbine size decreases.  The proposed facility is expected to be more cost effective than a smaller turbine.[64]

B (3).  The Effects of the Proposed Facility Upon the Natural and Socioeconomic Environment Compared to the Effects of Reasonable Alternatives.

61.      Air emissions from combustion turbines are dependent upon many factors such as type of fuel, ambient temperatures, and turbine loads.  It is anticipated that emissions from the combustion turbine proposed for this location will be controlled to best available control technology limits with internal design, add-on controls, or use of clean fuels to reduce the emissions of regulated pollutants.  Also, the Applicant will apply for an air permit that may place limits on the hours per year that fuel oil and natural gas can be burned.[65]  The impact on ambient air quality in areas surrounding the project is expected to be insignificant.  Estimates of projected ground level contributions from the project for sulfur dioxide, nitrogen oxides, and particulate matter are dependent upon site-specific conditions and are not yet available.  However, the Applicant’s preliminary analyses have indicated that the ground level impacts will be less than significant, as defined by the Minnesota Pollution Control Agency (MPCA).  Therefore, this facility is not expected to jeopardize any National Ambient Air Quality Standard for regulated pollutants.  Other sources of emissions that will be evaluated include duct burners, emergency generators, oil storage tanks, and cooling towers.  All of these sources have substantially less emission potential and will not cause significant ambient concentrations.  Cooling tower location and vapor drift from the cooling towers will also be evaluated to avoid impact with adjacent Interstate 35 traffic.  This information will be an integral part of the project’s applications to the EQB as well as the MPCA.[66] 

62.      Natural gas alternatives generally emit fewer pollutants than either coal or oil-fired alternatives, per kilowatt hour.[67]

63.      Preliminary engineering estimates of the instantaneous maximum demand for water are 1,500 gallons per minute (gpm) for cooling water.  Raw water will be treated and either stored in water-holding tanks or sent directly to a cooling tower to feed the evaporative and convective cooling process.  Cooling water for the steam turbine will be circulated in a closed loop through the condenser on the steam turbine, and cooling water for the combustion turbine will be used for various hydraulic and lubricating processes associated with that unit.  Preliminary engineering calculations indicate that process wastewater will be a maximum of 300 gpm.  Management of wastewater will be subject to regulatory review and approval.  At this time, it is anticipated that all of the wastewater will be discharged into a created wetland located on the site, in accordance with a National Pollutant Discharge Elimination System (NPDES) permit.  The Applicant favors creation of a wetland because it uses the plant’s wastewater stream, promotes infiltration and groundwater recharge, creates wildlife habitat, and enhances recreational opportunities for the community.[68]

64.      Under normal operating conditions, the proposed facility will use less water than a coal alternative, but more than a simple-cycle alternative.[69]

65.      The overall project site is anticipated to require up to 37 acres.  About 13 of those acres will be needed for the power generating facility and ancillary facilities.  The remaining acreage may be used for creating wetlands or for industrial or recreational purposes.  The proposed project will require approximately five more acres than a simple-cycle alternative, less acreage than a coal alternative, and the same acreage as the oil-fired combined-cycle alternative.[70]

66.     An alternative that employs only fuel oil would create significantly more vehicle traffic than the proposed project.  A coal-fired alternative would require significantly greater rail traffic than the proposed project.[71]

67.     The Facility will have an equal or lesser impact on the natural environment  (water use, land use and transportation) than the other non-renewable alternatives.  It will have lower air emissions than other fossil fuel-fired alternatives that could reasonably meet the intermediate service demands.[72]

68.     The Facility will generate property tax payments each year.  To the extent that property taxes are correlated with capital costs, a baseload-coal project would generate higher property tax payments, a simple-cycle combustion alternative would have lower property tax payments, and an oil-fired combined-cycle alternative would generate the same property tax payments.  Conservation would not have any impact on property taxes.  The effect of purchased power on property taxes would vary by source.[73]

69.     The Facility will create about 250 jobs during peak construction, as would the simple cycle alternative and oil-fired combined-cycle alternative.  The coal alternative would create about 750 construction jobs.  The facility and the oil-fired combined-cycle alternative would each create 17 full-time-equivalent jobs during operation.  The simple-cycle alternative would require 3 full-time jobs; the coal alternative would create more permanent jobs than the facility.  When completed, the Facility will not place any significant demands on local governmental services including roads, schools, hospitals, social welfare and police.[74]

70.     The total fuel consumption of each alternative will vary with the operational profile of the plant.  However, the consumption rates are 1.823 Mcf/hr for the proposed facility, 12,320 gal/hr for the oil-fired combined cycle, and 2.555 Mcf/hr for the natural gas-fired simple-cycle combustion turbine.  If the Facility runs at a 50 percent capacity factor, the annual fuel consumption would be 7,986 Mcf for the proposed facility, 53,962 mgal for the oil-fired combined cycle, and 11,192 Mcf for the natural gas-fired simple cycle combustion turbine.[75]

 

B (4).  The Expected Reliability of the Proposed Facility, Relative to Reasonable Alternatives.

71.     The Facility is expected to have an annual availability factor in excess of 95 percent and can be called upon to deliver up to its seasonal peak capacity within 4 hours.  The conventional simple-cycle alternative and oil-fired combined cycle are expected to have similar availability factors, while baseload coal would be less than 90 percent.  The Facility is at least as reliable as the alternatives.[76]

72.     There is no reasonable and prudent alternative to the proposed facility, considering size, type, timing cost, environmental and socioeconomic effects, and reliability of the project and the reasonable alternatives.[77]

C. Benefits to Society Compatible with Protecting the Natural and Socioeconomic Environments, including Human Health

73.     The Applicant must demonstrate by a preponderance of the evidence that the Facility will provide benefits to society in a manner compatible with protecting the natural and socioeconomic environments, including human health, and specifically, must consider the following:

(a)            The relationship of the facility to overall state energy needs;

(b)            The effects of the facility on the natural and socioeconomic environments relative to not building the facility:

(c)            The effects of the facility on future development;

(d)            The socially beneficial uses of the output of the facility, including the protection or enhancement of the environment.[78]

C (1).  The Relationship of the Proposed Facility, or a Suitable Modification, to the State Energy Needs.

74.     Existing resources in the MAPP-US region beyond 2005 cannot meet the region’s capacity deficit.  Additionally, the MAPP-US region and the Applicant have a need for economic electric energy.  Existing MAPP resources are dominated by baseload capability. Recent additions to the pool have generally been peaking facilities.  There is a need for intermediate capacity.  The facility would fill such a need in a relatively economic manner, represent an important source of new capacity and energy, and help ensure that Minnesotans’ growing demand for electricity is met.[79]  Approval of this Facility will distribute generating capacity to a small company, offsetting reliance on the large companies that provide the majority of generation capacity in Minnesota.[80]

75.     Not constructing the Facility is likely to reduce the reliability of the electrical generation system in Minnesota because of the projected deficits in electrical energy and generation capacity.  Despite the projected deficits, few new projects have been announced or pursued.[81]

C (2).  The Effects of the Proposed Facility Relative to Not Building the Facility.

76.     There will be significant traffic and noise pollution during construction of the Facility, and significant noise pollution and air emissions during operation.  These environmental effects are subject to the permitting authority of various governmental agencies.[82]

77.     Because the Facility will burn a fossil fuel, it will affect the natural environment.  However, the proposed combined-cycle technology, relying largely on natural gas and steam to generate electricity, will make the facility one of the most efficient fossil fuel power plants in Minnesota, with less negative impact on the natural environment than less fuel-efficient facilities.[83]  If the Facility is not built, there will be continued reliance on less efficient, more polluting generation to meet peak capacity.[84]

78.     The socioeconomic environment will benefit from the investment of approximately $150 million in the Facility, and 250 temporary jobs during the two-year construction period.  The Facility will add at least 17 full-time jobs to the local economy and increase the local tax base over the 30-year life of the plant.[85]

79.     The use of imported goods and resources to produce electricity can affect national energy security, balance of payment goals or other important policy or social goals.  The Facility may contribute to the extent that imported resources are used.[86]  However, the direct effect of this facility’s use of natural gas and fuel oil is difficult to measure.  Much of the natural gas will come north from the Texas-Oklahoma area; some will come from Canada.  The proportions may depend on price and availability.[87]

C (3).  The Effects of the Facility, or a Suitable Modification Thereof, in Inducing Future Development.

80.     The Facility will meet the increased demand from the Applicant’s member-owners and the State for a relatively low-cost and reliable source of electricity and contribute to a stable infrastructure that will support future economic growth in Minnesota.  The economic health of the region depends in part on reliable, low-cost electricity.  Future development in the Facility’s vicinity may be stimulated by the plant’s ability to provide a ready hot water supply to nearby businesses.  The southern Minnesota area will also benefit from revenues generated during construction, and from the skilled workers who will operate the Facility.[88]

C (4).  The Socially Beneficial Uses of the Output of the Proposed Facility, or a Suitable Modification, Including Its Uses To Protect or Enhance Environmental Quality.

81.     The Facility is expected to provide needed capacity and energy resources for the Applicant’s member cities and to the state and region.  Customers in the member cities will use the energy to produce a variety of goods and services.[89]

82.     The Facility is both economically and environmentally attractive.  While the Facility uses a relatively clean fuel, any combustion technology will have some impact on the surrounding environment.  The Facility’s proposed location would minimize the construction of natural gas pipeline and transmission lines.  The project may enhance the overall reliability of the regional transmission system, which has been under increasing stress. Generating electricity close to the customers will tie up less transmission capacity than transmitting generation from a greater distance.[90]

83.     The Applicant has been meeting its increasing obligations through purchases of available capacity from MAPP.  MAPP’s excess capacity  has been largely absorbed and competitively priced purchases are not likely to be available.[91]

84.     Conservation and load management programs have increased use of the existing resources but cannot eliminate the need for summer intermediate generation.  The Facility will help the Applicant’s members continue to supply low cost power to their customers.  Low cost electricity is important to supporting stable economic growth in the region.[92]

85.     The Facility is expected to provide benefits to society in a manner compatible with protecting natural and socioeconomic environments, including human health.

D.  The Design, Construction, or Operation of the Proposed Facility, or a Suitable Modification, Will Comply with Relevant Policies, Rules, and Regulations of Other State and Federal Agencies and Local Governments

86.     FEP plans to comply with all relevant policies, rules, and regulations of state and federal agencies and local governments applicable to construction and operation of the proposed facility.[93]  There was no evidence that FEP could not or would not comply.

Public Comment

          87.     At the public hearing, there were questions about the long-range plans for the plant, noise, and possible use of renewable resources to supplement natural gas.  There was also concern about the possible effect on property values.  Representatives from FEP, EQB and the Department responded.  There was no public opposition to the certificate of need.[94]

Environmental Report

          88.     As directed, the Department prepared an Environmental Report.[95]  It included a brief description of the proposed facility, identification of reasonable alternatives, a general evaluation of the proposal and alternatives, and a general analysis of the alternatives of no facility, different levels of capacity, and delayed construction, including the potential of reducing the need for the proposed facility by conservation and load management.  The Environmental Report is less exhaustive than an Environmental Impact Statement.

          89.     The Department issued the Draft Environmental Report on March 18, 2003.  It accepted written comments on the Draft through April 30, 2003.[96]  In addition the Department considered comments made at the public hearing on April 30, 2003 that expressed environmental concerns.

          90.     The Draft Environmental Report, comments to the Report, and the Department’s response to the comments constitute the Final Environmental Report and are included in the record of this proceeding.[97]

91.     The Environmental Report does not disclose any significant environmental bar to the construction of the proposed facility.

CONCLUSIONS OF LAW

1.                 The Public Utilities Commission and the Administrative Law have jurisdiction to consider the requested certificate of need.[98]

2.                 The PUC determined that FEP’s Application was substantially complete as of January 27, 2003.[99]

3.                 The criteria for evaluating the application for certificates of need are set forth in statute and rule.[100]  Application of the criteria includes a determination that there is no reasonable and prudent alternative.[101]

4.                 A public hearing was held at places and times convenient to the public, and public testimony was taken at the public hearings.[102]  The public hearing and evidentiary hearing were held and completed on April 30, 2003. Clark Kaml, a member of the staff of the PUC, was available throughout the proceeding to facilitate citizen participation.[103]

5.                 Xcel provided notice of the hearings as provided by statute and rule, and provided additional notice as well.[104]

6.                 The Environmental Quality Board is authorized to issue permits for the siting of large energy facilities and members of its staff participated in the hearing.[105]

7.                 No “large energy facility” can be sited or constructed in Minnesota without a certificate of need from the Commission.[106]  The Facility is an electric power generating plant with a capacity of more than 50,000 kilowatts, and includes a transmission line necessary to interconnect the plant.[107]

8.                 Before it can grant a certificate of need for a generating facility, fueled by a nonrenewable energy source, the PUC must fully examine the option of generating power by means of renewable energy sources, including hydro, wind, solar, and geothermal energy and the use of trees or other vegetation as fuel.[108]

9.                 The Facility is not a “renewable energy facility.”  FEP has demonstrated that the Facility cannot be replaced by a renewable energy facility, and has demonstrated that the Facility is less expensive (including environmental costs) than power generated  by a renewable energy source.[109] 

10.             Any approved certificate of need may be contingent upon modifications required by the PUC.[110]

11.             There is substantial evidence on the record of each criteria listed in Minn. Stat. § 216B.243 and Minn. R. 7849.0120 to support the certificate of need.

12.             The Applicant has demonstrated that there is a need for the Facility, based on reasonable MAPP forecasts, appropriate for determining the need for the proposed facility.

13.             Increasing planned conservation and load management efforts will not be sufficient to meet the anticipated increased demand and is not a cost-effective alternative to the proposed facility.

14.             The Applicant does not promote electricity consumption in Minnesota or elsewhere.

15.             Current and planned facilities not requiring certificates of need, including purchased power, are not adequate to meet projected needs.

16.             Denial or delay of the certificate of need will have an adverse effect upon the future adequacy reliability, and efficiency of the energy supply and on FEP’s ability to serve its customers, neighboring systems or overall availability of electric power.[111] 

17.             Considering size, type, timing, cost, natural and socioeconomic environmental effects, and reliability, there is not a more reasonable and prudent alternative to the proposed facility.

18.             The Facility will make efficient use of existing resources.

19.             The Facility will provide benefits to society in a manner compatible with protecting the natural and socioeconomic environments, including human health.

20.             The design, construction, or operation of the Facility will not fail to comply with relevant policies, rules, and regulations of other state and federal agencies and local governments.

21.             The Environmental Report was filed as required, and its contents met the criteria set forth in rule.[112]  It is available to the Commission to consider in its deliberations on the application for a certificate of need.

22.             The citations to transcripts or exhibits in these Findings of Fact are not intended to indicate that all evidentiary support in the record has been cited.

Based on the Findings of Fact, Conclusions of Law and the record in this proceeding the ALJ makes the following:

RECOMMENDATION

That the Commission grant a certificate of need for a 250-megawatt generating facility to FEP.

 

Dated this 6th day of June, 2003.

	s/Beverly Jones Heydinger
BEVERLY JONES HEYDINGER
Administrative Law Judge