6-2500-15659-2

IP-6339/CN-03-1841

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE MINNESOTA PUBLIC UTILITIES COMMISSION

 

In the Matter of the Application for a Certificate of Need for the Trimont Area Wind Farm

FINDINGS OF FACT,

CONCLUSIONS AND RECOMMENDATION

         

This matter came on for evidentiary and public hearings on April 5, 2004, in the Triumph Hall, 546 Main Street East, Trimont, MN.  The evidentiary hearing began at 1:00 p.m., and then there were public hearings at 3:00 p.m. and 7:00 p.m.  None of the sessions lasted longer than 1.5 hours, and all persons were given an opportunity to present their views.  The record closed on April 7, 2004, upon receipt of a late-filed exhibit.

Appearing on behalf of the Applicant herein, Trimont Wind I, LLC, (“Applicant” or “Trimont”) was John E. Drawz, of the firm of Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, MN  55402-1425.

Appearing on behalf of the Intervenor herein, Minnesota Department of Commerce, was Karen Finstad Hammel, Assistant Attorney General, 445 Minnesota Street, Suite 1400, St. Paul, MN  55101-2131.

The Minnesota Environmental Quality Board was represented by David E. Birkholz, and the staff of the Minnesota Public Utilities Commission was represented by David L. Jacobson.

NOTICE

 

Notice is hereby given that, pursuant to Minn. Stat. § 14.61, and the Rules of Practice of the Public Utilities Commission and the Office of Administrative Hearings, exceptions to this Report, if any, by any party adversely affected must be filed within 10 days of the mailing date hereof with the Executive Secretary, Minnesota Public Utilities Commission, 350 Metro Square, 121 - 7th Place East, St. Paul, Minnesota 55101.  Exceptions must be specific and stated and numbered separately.  Proposed Findings of Fact, Conclusions and Order should be included, and copies thereof shall be served upon all parties.  Oral argument before a majority of the Commission will be permitted to all parties adversely affected by the Administrative Law Judge’s recommendation who request such argument.  Such request must accompany the filed exceptions or reply, and an original and 12 copies of each document should be filed with the Commission.

 

The Minnesota Public Utilities Commission will make the final determination of the matter after the expiration of the period for filing exceptions as set forth above, or after oral argument, if such is requested and had in the matter.

 

Further notice is hereby given that the Commission may, at its own discretion, accept or reject the Administrative Law Judge’s recommendation and that said recommendation has no legal effect unless expressly adopted by the Commission as its final order.

Based upon all of the proceedings herein, the Administrative Law Judge makes the following:

FINDINGS OF FACT

Procedural History and the Parties.

1.               Trimont is an Oregon limited liability company wholly owned by PPM Energy, Inc. (“PPM”), an Oregon corporation.  Trimont has entered into a Development and Purchase Option with a second LLC, known as Trimont Area Wind Farm (“TAWF”).  TWAF, in turn, is owned by more than 40 local farmers and landowners in the Trimont area who own land covering 35 square miles straddling the Martin-Jackson County line.  Exhibit 18, p. 1.

2.               The Department 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 that a final determination on the Application can be made.

3.               The Minnesota Environmental Quality Board (“MEQB”) is the state agency responsible for the permitting of power plant sites and transmission line routes under the Power Plant Siting Act (Minn. Stat. §§ 116C.51‑69) and for the preparation of the Environmental Report required in certificate of need proceedings (Minn. Rules 4410.7020; Exhibit 9 at 1).

4.               On November 18, 2003, Trimont filed its Application for a Certificate of Need:  Trimont Area Wind Farm Project:  Martin and Jackson Counties, Minnesota (Exhibit 1), for a 100 megawatt (“MW”) LWECS (the “Facility” or the “Project”) to be constructed near Trimont, Minnesota.  The Company stated that all of the Project’s energy would be sold to Great River Energy (“GRE”), Minnesota’s largest generation and transmisson cooperative.

5.               On November 19, 2003, the Commission issued its Notice of Comment Period on the Request for Variance and Completeness of the Certificate of Need Application (Exhibit 5).

6.               On November 26, 2003, the Applicant requested that the MEQB prepare the Environmental Report (Exhibit 6).

7.               On December 1, 2003, the DOC and the MEQB submitted comments on the request for variance and completeness (Exhibits 7 and 8).

8.               On December 22, 2003, the Commission issued two orders:  (1) Order Granting Exemption Requests in Part, Permitting Expedited Filing, Accepting Application as of Date of Supplemental Filing, and Requesting Preparation of Environmental Report (Exhibit 9); and (2) Notice and Order for Hearing (Exhibit 10), which referred the matter to the Office of Administrative Hearings (“OAH”).  The Commission asked the DOC to continue its examination of the merits of the Application and to provide a recommendation on the reasonableness of granting the Application.

9.               The DOC intervened as a matter of right.

10.           On January 12, 2004, Trimont filed its Supplemental Filing (Exhibit 11) containing its responses to the Commission’s requests made on December 22, 2003.

11.           A Pre‑Hearing Conference was held on January 16, 2004.

12.           Notice of the public and evidentiary hearings (as required by Minn. Stat. § 216B.243, subd. 4) and the availability of the Environmental Report (as required by Minn. Rules 4410.7030, subp. 10) was published and served as follows:

Minneapolis Star Tribune, on February 19, 2004 (Exhibit 12)

St. Paul Pioneer Press, on February 19, 2004 (Exhibit 13)

Fairmont Sentinel, on February 19, 2004 (Exhibit 14)

Jackson County Pilot, on February 19, 2004 (Exhibit 15)

State Register, on Monday, January 5, 2004, at 28 S.R. 868 (Testimony of David Jacobson)

Service by mail, on February 12, 2004 (Exhibit 17)

EQB Monitor, on January 19, 2004 (Exhibit 16)

- - - - - - - -

EQB Minitor, on March 29, 2004

Service by mail on March 26, 2004

Service on MPUC on March 29, 2004

Posting on MEQB web page on March 29, 2004

 

Applicable Statutory and Rule Criteria.

13.           The Applicant’s proposed Facility qualifies as a “large energy facility” under Minn. Stat. § 216B.2421, subd. 2(1), a “large electric power generating plant” under Minn. Stat. § 116C.52, subd. 5, and a “large electric generating facility” under Minn. Rules 7849.0010, subd. 13. 

14.           Minn. Stat. § 216B.243 and Minn. Rules 7849.0010 through 7849.0400 set forth the criteria which must be met by the Applicant to establish need for its proposed Facility.

15.           Minn. Stat. § 216B.243 prohibits siting or constructing a large energy facility without first obtaining a certificate of need from the Commission.  As set forth in Minn. Rules 7849.0120, a certificate of need must be granted to the applicant if:

(A)      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, considering:

(1)      the accuracy of the applicant’s forecast of demand for the type of energy that would be supplied by the proposed facility;

(2)      the effects of the applicant’s existing or expected conservation programs and state and federal con-servation programs;

(3)      the effects of promotional practices of the applicant that may have given rise to the increase in the energy demand, particularly promotional practices which have occurred since 1974;

(4)      the ability of current facilities and planned facilities not requiring certificates of need to meet the future demand; and

(5)      the effect of the proposed facility, or a suitable modification thereof, in making efficient use of resources;

(B)      a more reasonable and prudent alternative to the proposed facility has not been demonstrated by a preponderance of the evidence on the record, considering:

(1)      the appropriateness of the size, the type, and the timing of the proposed facility compared to those of reasonable alternatives;

(2)      the cost of the proposed facility and the cost of energy to be supplied by the proposed facility compared to the costs of reasonable alternatives and the cost of energy that would be supplied by reasonable alternatives;

(3)      the effects of the proposed facility upon the natural and socioeconomic environments compared to the effects of reasonable alternatives; and

(4)      the expected reliability of the proposed facility compared to the expected reliability of reasonable alternatives;

(C)     by a preponderance of the evidence on the record, the proposed facility, or a suitable modification of the facility, will provide benefits to society in a manner compatible with protecting the natural and socioeconomic environments, including human health, considering:

(1)      the relationship of the proposed facility, or a suitable modification thereof, to overall state energy needs;

(2)      the effects of the proposed facility, or a suitable modification thereof, upon the natural and socioeconomic environments compared to the effects of not building the facility;

(3)      the effects of the proposed facility, or a suitable modification thereof, in inducing future develop-ment; and

(4)      the socially beneficial uses of the output of the proposed facility, or a suitable modification thereof, including its uses to protect or enhance environmental quality; and

(D)     the record does not demonstrate that the design, construction, or operation of the proposed facility, or a suitable modification of the facility, will fail to comply with relevant policies, rules, and regulations of other state and federal agencies and local governments.

16.           Minn. Stat. § 216B.243, subd. 3, provides as follows:

          No proposed large energy facility shall be certified for construction unless the applicant can show that demand for electricity cannot be met more cost effectively through energy conservation and load-management measures and unless the applicant has otherwise justified its need.

17.           Pursuant to Minn. Rules 4410.7020, the MEQB is responsible for preparation of an Environmental Report on the Applicant’s proposed Facility in a certificate of need proceeding. See Exhibit 9.  According to the Rule, the Environmental Report shall include:

A.       A general description of the proposed project and associated facilities.

B.       A general description of the alternatives to the proposed project that are addressed.  Alternatives shall include the no-build alternative, demand side management, purchased power, facilities of a different size or using a different energy source than the source proposed by the applicant, upgrading of existing facilities, generation rather than transmission if a high voltage transmission line is proposed, transmission rather than generation if a large electric power generating plant is proposed, use of renewable energy sources, and those alternatives identified by the chair. 

C.       An analysis of the human and environmental impacts of a project of the type proposed and of the alternatives identified. 

D.       An analysis of the potential impacts that are project specific. 

E.       An analysis of mitigative measures that could reasonably be implemented to eliminate or minimize any adverse impacts identified for the proposed project and each alternative analyzed.

F.       An analysis of the feasibility and availability of each alternative considered.

G.      A list of permits required for the project.

H.       A discussion of other matters identified by the chair.

18.           Notice of the pending project and the Environmental Report preparation process was provided as required by Rule.  The MEQB held public scoping meetings on the Environmental Report on January 13 and February 3, 2004, in Trimont, Minnesota.  The public comment period ended on February 24, 2004.  Exhibit 18.

19.           The MEQB Chair issued the required Scoping Order on March 1, 2004.  Notice of the Chair’s Order was mailed and published as required by Rule.  Exhibit 18.

20.           The MEQB completed the Environmental Report on March 29, 2004.  Notice of the Environmental Report’s availability was mailed and published as required by Rule.  See, Finding 12 and Exhibit 18, Appendix E.  The Environmental Report was made a part of the Certificate of Need record as Exhibit 18, and David Burkholz of the MEQB appeared at all of the hearing sessions in Trimont to answer questions about the Environmental Report.

The Project

 

21.           The proposed Facility is expected to generate electricity using up to 67 1.5 MW wind turbine generators.  Exhibit 1 at 17.  The combined nominal net electric generating capacity of the proposed Facility will be approximately 100 MW.  Id.  The Project is designed to provide a dedicated source of renewable energy to help GRE meet the State’s Renewable Energy Objective (“REO”), which is codified atMinn. Stat. § 216B.1691.  Id. at 1, 7; Exhibit 9 at 2.  The proposed Facility will interconnect with an existing 345 kV transmission line (the Lakefield-Wilmarth line) at Xcel Energy’s Martin County Substation.  Exhibit 1 at 8, 20.  Trimont and GRE have entered into a fifteen-year Power Purchase Agreement (“PPA”) whereby GRE will purchase all of the Project’s energy for its member-consumers.  Exhibit 4.

22.           The Facility’s proposed location was chosen to utilize existing transmission infrastructure and to provide for efficient use of land and wind resources, thereby minimizing environmental impact.  Exhibit 1 at 8, and 21-22.

APPLICATION OF STATUTORY AND RULE CRITERIA

23.           The Commission granted several of Trimont’s requests for exemptions from the requirements of Minn. Rules Chapter 7849.  Exhibit 9.  Because non-renewable alternatives to the Project are inconsistent with the Project’s purpose, the Commission exempted Trimont from discussing non-renewable alternatives or providing cost data for non-renewable alternatives.  Exhibit 9 at 3-4.  Because of Trimont’s status as an Independent Power Producer (“IPP”), the Commission exempted Trimont from providing system-wide data, information on conservation programs, and information relating to the preparation and accuracy of a demand forecast as required by Minn. Rules 7849.0250.C, .0270, .0280, .0290, and .0300.  Id.  The Commission’s Order stated that the relevant system was GRE’s and that those rule requirements had been met through Trimont’s submission of GRE’s Integrated Resource Plan (“IRP”) as an appendix to its Application.  Id.  Trimont was also exempted from discussing high-voltage transmission lines, based on a finding that transmission facilities were not true alternatives to the proposed Facility.  Id. at 4. 

The Probable Result of Denial of the Certificate of Need  Would be an Adverse Effect on the Future Adequacy, Reliability, and Efficiency of Energy Supply to GRE, the People of Minnesota, and Neighboring States.  [7849.0120.A]

24.           A certificate of need can be issued only if the probable result of denial would be an adverse effect on 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.  Minn. Rules 7849.0120.A.  Since Trimont is an IPP and thus does not have a “system” or “customers” as contemplated by the rule, the Commission exempted it from providing system information.  See Exhibit 9 at 3-4.   

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.

Minn. Rules 7849.0120.A(1)-(5).

25.           The Project has been designed from its inception to respond to GRE’s desire to meet the REO and to obtain a low-cost renewable energy resource.  The Project was selected by GRE through a competitive bidding process because of its ability to provide GRE with an efficient, cost-effective means of meeting those goals.  The consequences of denial of the Application would be a significant impairment of GRE’s ability to meet the REO.  Exhibit 1 at 6-8.

26.           Trimont has negotiated a fifteen-year PPA whereby all of the proposed Facility’s energy will be sold to GRE.  GRE is the second largest power supplier in Minnesota and the fourth largest cooperative power supplier in the nation.  GRE provides power and energy to 28 electric distribution cooperatives in Minnesota and Wisconsin.  Their combined service territory stretches from the farming communities in southern Minnesota through the northern lake country and includes many of the outer-ring suburbs surrounding the Twin Cities.  The demand for electricity in GRE’s regional service territory is growing, while supplies remain limited and future deficits are apparent.  In addition to helping GRE meet the REO, the Project would serve to assist in meeting GRE’s total future energy needs, which are projected to grow at an average annual rate of 2.8 percent between 2003 and 2017.  The Project would also reduce GRE’s expected future deficits in resources, which are projected to reach 1,478 MW by 2017.  It would provide a clean, low-cost source for the region’s and the State’s renewable energy needs.  Id. at 7, Appendix A.

27.           The Mid-Continent Area Power Pool (“MAPP”) and the Department have in recent years consistently reinforced the regional need for increased generating capacity in the coming decade.  Cost fluctuations and reliability problems serve to reinforce the need for sufficient capacity, low-cost energy, and diverse generation sources.  Despite recent industry difficulties, IPPs remain an important tool for meeting regional energy needs, stabilizing energy costs, and enhancing energy reliability.  The Project offers GRE, Minnesota, and the MAPP region the opportunity to ensure that adequate capacity exists, stabilize and perhaps lower wholesale power prices, and provide added reliability through a clean, cost-effective renewable energy generation facility.  Id.

28.           GRE’s IRP states that wind energy is currently the most cost-effective renewable energy resource in Minnesota.  Id. at 7.  As a result of its most recent forecast demonstrating a need for energy in the near-term, and its commitment to making a good faith effort to meet the REO, GRE selected Trimont through a competitive bidding process to supply wind energy to help satisfy its forecasted needs and renewable energy objectives.  Id. at 7-8.

29.           Denial of Trimont’s Application would adversely affect GRE’s ability to meet its energy requirements in a cost-effective manner and would significantly hinder GRE’s ability to meet the REO.  Because the Project offers Minnesota and the MAPP region a clean, low-cost, and efficient renewable energy source, denial of the Application would also hinder Minnesota in meeting its energy needs and maintaining its position as a national leader in promoting and supporting an environmentally-sound renewable energy policy.  Id. at 8.

          Accuracy of Forecast Demand for the Type of Energy to be Supplied by the Proposed Facility.  [7849.0120.A(1)]

30.           The Commission’s December 22, 2003, Order (Exhibit 9) exempts Trimont from providing information on peak demand and annual consumption forecast and concludes that the requirement set forth in Minn. Rules 7849.0270 is met by including GRE’s IRP in the Application. 

31.           The MAPP July 1, 2003, Load and Capability Report (“Report”) forecasts a 221 MW deficit in the summer of 2006 for the MAPP-US region that grows to 1,982 MW by the summer of 2012.  Exhibit 20.  In spite of recent committed or planned resources, additional plants are needed in the near future.  The Report shows that the regional supply and demand situation  is moving towards deficits by an average of 380 MW per year.  The Report shows that the MAPP-US region load grows to 35,308 MW in 2013 from 29,933 MW in 2003, an average of 600 MW per year.  Exhibit 20.

32.           In GRE’s most recent IRP, GRE’s summer and winter demand were forecasted to increase by about 2.5 percent annually (2003 to 2017).  Exhibit 1, Appendix A.  That equals an average of 53.5 MW over the forecast period during the winter season and 72.5 MW during the summer season.  System energy was forecasted to grow at an average annual rate of 2.8 percent over the forecast period.  The Department reviewed those forecasts and concluded they were reasonable, with two qualifications.  One cautions against over-reliance on judgment and the other relates to conservation and the forecast.  DOC Comments in MPUC Docket No. ET2/RP-03-974 (November 3, 2003). 

33.           In GRE’s most recent IRP, GRE provided information on its resources and the resulting surplus/deficit.  GRE initially estimated its first deficit to occur in 2004.  The DOC revised that estimate to occur in 2005 at 145 MW, growing to 1,473 MW by 2017.  Id.  GRE later provided an update that moved the first deficit to 2007 (131 MW).  GRE’s Updated IRP (September 26, 2003).  Overall, the update substantially reduced the deficits between 2005 and 2009, but did not change the results in other years.  The Department reviewed those calculations and concluded that they were sufficient but that an improvement could be made regarding conservation and the forecast, which would have an impact.  Id. 

34.           A dual need for both additional capacity and energy exists in MAPP.  The MAPP-US region is expected to be capacity deficit by 221 MW in 2006.  Exhibit 20.  The proposed Facility can help to meet that need.  Forecasted GRE load growth and expiration of existing capacity purchases justify the proposed Facility. 

 

          The Effects of Conservation Programs.  [7849.0120.A(2)] 

35.           The Commission’s December 22, 2003, Order exempts Trimont from providing information on conservation programs and their potential for reducing the need for new generation and transmission facilities and concludes that the requirement set forth in Minn. Rules 7849.0290 is met by including GRE’s IRP in the Application.  Exhibit 9.

36.           Conservation programs, such as new or expanded Demand Side Management (“DSM”) programs, would be unlikely to provide a timely, cost-effective substitute for the type and quantity of electric capacity or energy provided by the proposed Facility.  The stated need for the proposed Facility is primarily to help GRE meet the REO.  As such, energy saved from conservation projects is not a direct substitute for Project energy.  Moreover, achieving additional reduction of the magnitude needed to impact the need for the proposed Facility is not feasible considering that the reduction would need to be 10 to 15 MW and 340 MWh and occur before the end of 2004.  Exhibit 4. 

37.           The annual goals for DSM selected by GRE in its most recent IRP are 7.6 million kWh and 17.5 MW.  The Department reviewed those goals and concluded that they were both reasonable and achievable.  Moreover, the stated need for the Project is to help GRE meet the REO.  As such, it would not be possible for DSM to equate to the Project’s energy production in the manner proposed by the Project.

The Effects of Promotional Practices.  [7849.0120.A(3)]

38.            Trimont has not conducted promotional activities that have measurably contributed to the need for the proposed Facility or increased demand for wholesale power in the region. Exhibit 1 at 15; Exhibit 11 at 15; Exhibit 4. 

The Ability of Current and Planned Facilities Not Requiring Certificates of Need to Meet Future Demand.  [7849.0120.A(4)] 

39.           The primary alternatives to the proposed Facility that would not require certificates of need are power purchases from existing renewable facilities, purchases from renewable plant facilities outside Minnesota, or construction of renewable Minnesota facilities that are small enough not to require certificates of need (less than 50 MW).  MAPP forecasts indicate that existing and known new facilities, both renewable and non-renewable, will not be able to meet forecasted requirements beginning in2006.  Exhibit 1 at 39; Exhibit 20.  Therefore, purchases from existing renewable facilities within MAPP are likely to be cost prohibitive.  See Exhibit 1 at 39.  In addition, purchases from new or existing renewable generating facilities outside Minnesota would likely require new transmission infrastructure as well.  New renewable facilities that are small enough not to require a certificate of need would have to be very numerous to meet GRE’s and the region’s needs for renewable energy.  Exhibit 11 at 6; Exhibit 4.

40.           A major factor in GRE adding significant wind energy to its portfolio and choosing the proposed Facility to provide that energy was the cost savings that wind energy from the proposed Facility would provide over purchasing energy on the open market.  GRE currently purchases energy year round at a price averaging approximately $36/MWh.  Exhibit 4.  In 2005, GRE projects that it will need to purchase 1,123 GWh of energy at various times of the year on the short-term or spot market, at an average estimated cost of $37.62/MWh.  Exhibit 4.  GRE has concluded that the proposed Facility would provide energy to GRE at a price lower than prices available on the spot market.  Exhibit 1 at 21; Exhibit 4.

41.           Short-term capacity options are continuously being evaluated and purchased by GRE as transmission resources become available.  GRE projections have indicated, however, that there are inadequate amounts of available energy from other regional utilities through 2004.  Furthermore, growing transmission constraints make it more likely that schedules to import energy from outside the region will be cut.  The proposed Facility would enable GRE to obtain energy and meet the REO at a price lower than it could achieve by purchasing energy on the market, even if market resources do not encounter transmission difficulties.  Exhibit 1 at 21. 

42.            Trimont does not possess existing generation and transmission facilities or distributed generation and does not have a load-management program.  It has thus been exempted by the Commission from providing information relating to the same.  Exhibit 9 at 3.  GRE has examined the potential for it to increase the efficiency of and upgrade its existing energy generation and transmission facilities and load-management programs and has concluded that it cannot meet its need for 100 MW of renewable energy by those methods.  Exhibit 4. 

The Effect of the Proposed Facility in Making Efficient Use of Resources.  [7849.0120.A(5)]

43.           The proposed Facility would make efficient use of existing resources.  Wind energy resources offer the ability to generate large amounts of energy with little to no negative effect on the environment.  The Project’s proposed location was selected to best utilize existing transmission infrastructure and make efficient use of land and wind resources, thereby minimizing environmental effects.  By connecting to Xcel’s Martin County Substation, the same substation that GRE’s Lakefield Junction Generating Station uses, the Project is designed as an efficient and highly cost-effective means of interconnection.  The Project’s proximity to and ability to interconnect with existing transmission infrastructure was a primary factor in GRE’s decision to select Trimont’s proposal to GRE’s renewables Request for Proposals (“RFP”).  Exhibit 1 at 8; Exhibit 4.

44.           Joint use of transmission is not the only benefit of the Project’s proximity to GRE’s existing peaking plant.  Adding 100 MW of wind energy that would use the same transmission facilities as the peaking plant would allow GRE the flexibility to manage both energy costs and transmission demand.  GRE has 550 MW of firm peaking capacity that is only operated approximately five percent of the year.  Demand on the peaking plant and the associated transmission facilities is at its height in the summer months.  The Project is expected to produce more energy in the late fall, winter, and early spring than in summer months.  Because wind resources are the most scarce in the summer months and plentiful during the times when the peaking plant is not an essential GRE resource, an optimal transmission arrangement is achieved.  Since GRE has the choice of which facility to use at any given time, neither facility is expected to place excess demand on the transmission system at any one time.  See Exhibit 1 at 8-9; Exhibit 4.

45.            The Project’s turbines are designed to be powered by the wind.  Exhibit 1 at 20, 23.  Distinguishing between capital costs and energy costs, the energy costs would include obtaining easements for the wind rights on the land where the turbines are located, along with operation, maintenance, and similar costs.  Id. at 23.  The Project would not require any land for water storage.  Id. at 25.  Only domestic-type water supply would be needed to provide potable water for Project workers.  Id. at 26.  No wastewater discharges would occur as a result of the construction or operation of the Project except for domestic-type sewer discharges associated with construction personnel and ongoing operations and maintenance personnel.  Id.  Surface water runoff would be managed in accordance with a construction storm water management plan that would be prepared prior to commencement of construction activities and would take advantage of the existing county and judicial ditch system.  Id. at 27.  Thus, the Project would have a minimal impact on existing environmental resources.

46.           In view of the foregoing, the ALJ concludes that denial of the Certificate of Need application would adversely impact the future adequacy, reliability, and efficiency of energy supply for GRE, its members, the people of Minnesota, and neighboring states.

A More Reasonable and Prudent Alternative to the Proposed Facility Has Not Been Demonstrated by a Preponderance of the Evidence on the Record, Considering Its Size, Type, Timing, Cost, Environmental and Socioeconomic Effects, and Expected Reliability.  [7849.0120.B]

47.           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.  Minn. Rules 7849.0120.B.  The factors to be considered in assessing alternatives are:

(1)      the appropriateness of the size, the type, and the timing of the proposed facility compared to those of reasonable alternatives;

(2)      the cost of the proposed facility and the cost of the energy to be supplied by the proposed facility compared to the costs of reasonable alternatives and the cost of energy that would be supplied by reasonable alternatives;

(3)      the effects of the proposed facility upon the natural and socioeconomic environments compared to the effects of reasonable alternatives; and

(4)      the expected reliability of the proposed facility compared to the expected reliability of reasonable alternatives.

Minn. Rules 7849.0120.B.

48.           The Commission’s December 22, 2003, Order exempts Trimont from providing information on and discussing non-renewable alternatives to the proposed Facility, since non-renewable alternatives could not fulfill the proposed Facility’s purpose of increasing the supply of renewable generation as directed by statute.  Exhibit 9 at 3.  The Order states that non-renewable generation is not a true alternative to the proposed Facility and thus information about non-renewable generation is unnecessary to determine need.  Id.

49.            Trimont’s proposed Facility was selected by GRE as a result of GRE’s competitively bid RFP for renewable energy supply resources.  Exhibit 1 at 21; Exhibit 9 at 2; Exhibit 4.  Sixty-two bids were submitted from twenty-five developers.  Fifty-six of the bids were wind energy projects.  All five of the short-listed bids were wind projects.  Exhibit 1 at 2, 21; Exhibit 4.  After analyzing renewable energy resource costs and availability, GRE determined that wind is the ideal resource to meet the greatest percentage of its renewable energy objectives at the lowest cost.  Exhibit 1 at 8.

50.           The only alternatives to the Project considered by GRE were those that could meet GRE’s plan to fulfill the REO.  Id; Exhibit 4.  GRE examined all of the alternatives to the Project that were proposed in the responses to its renewables RFP.  It concluded that none of them is preferable to the proposed Facility because they are not commercially available on the scale of or schedule for the proposed Facility, they would not be as cost-effective, or suitable sites are not available.  Thus, through its renewables RFP process, GRE determined that no renewable alternative provided a more cost-effective, timely, and efficient solution to its needs than would the proposed Facility.  Cost was the primary factor that eliminated the biomass facilities.  GRE selected the Trimont Project over the other wind proposals based on cost, location, proximity and ability to interconnect with existing transmission facilities, the quality of the Trimont proposal, the strength on Trimont’s management team and ownership structure, and the fact that it best satisfied the RFP criteria.  Exhibit 1 at 17; Exhibit 4.  The proposed Facility would be less expensive, including environmental costs, than power generated by reasonably available renewable energy sources.  Exhibit 1 at 8-11.

51.           Since there are no non-wind renewable alternatives that can reasonably meet the Project’s objectives, the Applicant undertook a general, rather than detailed, cost analysis of renewable alternatives. 

52.           An analysis of the renewable alternatives appears in the Application.  Exhibit 1 at 21-29.  The Applicant has met the criteria of exploring the possibility of generating 100 MW of power by means of renewable energy sources. 

The Appropriateness of the Proposed Facility’s Size, Type, and Timing Compared to those of Reasonable Alternatives.  [7849.0120.B(1)]

53.           The proposed 100 MW Facility is intended to meet GRE’s and the region’s need for renewable energy by late 2004.  Exhibit 1 at 17.  The Project’s proposed in-service date will be between December 31, 2004 and December 31, 2005.  The date (and the entire project), is dependent upon renewal of the Production Tax Credit. 

54.            Trimont’s winning bid in GRE’s competitive bidding process for renewable generation is for a 100 MW facility.  Trimont has proposed no alternatives to GRE nor does it intend to do so.  GRE’s IRP sets forth GRE’s analysis of all available generation and its rationale for selecting wind as its preferred means for meeting the REO.  Exhibit 11 at 6.

55.           Only renewable alternatives are appropriate for comparison.  Exhibit 9 at 3; Exhibit 4.  In addition to wind proposals, GRE also received responses for biomass projects.  Based in part on GRE’s IRP, biomass projects were available but were not selected because of factors including pricing, location, and size.  Based on other projects that have been constructed, it is unlikely that a single biomass facility on the scale of the proposed Facility would be economically feasible.  The three biomass projects that have undergone the MEQB environmental review process range in size from 28.5 MW to 65 MW.  Biomass facilities large enough to meaningfully assist GRE in satisfying the REO were not cost-effective.  Id.  Expansion of existing or development of new conservation and/or load management programs of the necessary size would be difficult to achieve in a timely manner.  Exhibit 4.

The Cost of the Proposed Facility and the Energy Supplied by It Compared to Reasonable  Alternatives.  [7849.0120.B(2)]

56.           The responses to GRE’s RFP demonstrated that the Project is expected to provide energy to GRE at prices substantially less than those of other renewable resources.  Exhibit 1 at 9; Exhibit 4.  GRE determined that wind energy is currently the most cost-effective renewable energy resource in Minnesota.  Exhibit 1 at 8.

57.           Industry literature estimates the cost of energy from biomass to range from 5.6 to 11.6 ¢/kWh in 1996 dollars.  The cost range of the biomass alternatives in GRE’s bidding process was from $44.75 to $53.60/MWh.  The MEQB’s biomass alternative is based on NGPP’s Waseca facility.  Xcel Energy’s competitive bidding for biomass phase II resulted in Xcel contracting for 35 MW from NGPP’s 38.5 MW Waseca facility at an average price of $104.35/MWh.  Xcel Petition in MPUC Docket No. E002/M-04-91 (January 16, 2004).  Assuming the availability of the Production Tax Credit for wind energy, Trimont’s proposal would be a far more cost-effective means of assisting GRE in meeting the REO.  Id. at 7.

58.           Biomass fails to meet reasonable Project objectives.  Biomass resources use a wide variety of renewable fuels.  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.  Solid biomass fuels include wood and waste wood, switchgrass, and alfalfa stems.  Ethanol derived from corn is also considered a renewable fuel.  Having 100 MW of solid fuel biomass capacity available in 2004 is unlikely due to fuel availability, cost, and siting issues.  GRE’s RFP demonstrated that biomass facility alternatives offered prices ranging from $44.75-$53.60/MWh, substantially higher than the proposed Facility.  Accordingly, biomass is not a reasonable alternative.

The Effects of the Proposed Facility on the Natural and Socioeconomic Environments Compared to the Effects of Reasonable Alternatives.  [7849.0120.B(3)]

59.           The overall effects of the proposed Facility on the natural and socio-economic environments are less invasive, basically benign, and preferable to those of any alternatives.  Exhibit 18, Section 4.

 

Air Emissions

60.           The proposed Facility will have no air emissions, unlike biomass alternatives, which produce nitrogen oxides, low levels of sulfur dioxide, particulate matter, carbon dioxide, volatile organic compounds, and other pollutants.  Exhibit 11 at 11.

Water Use

61.           The proposed Facility would not use substantially more water than any reasonable alternative and will use substantially less than a biomass facility.  It would not require any water to be used for an alternate cooling system.  Exhibit 1 at 26; Exhibit 11 at 11.  There would be no groundwater pumping or appropriation associated with the Project, other than a domestic-type water supply to provide potable water for Project workers.  Exhibit 1at 26, 30.  A well may be installed adjacent to the Project operations building in accordance with applicable regulations.  Id. at 26.  A biomass facility of 38.5 MW would require a supply of water for cooling tower makeup, boiler makeup, and potable water.  The majority of water use at the site would be for the cooling towers.  If well water were used, the average flow rate would be a maximum of 592 gallons per minute for the biomass facility.  Exhibit 18, p. 18.

                    Land Use

62.           The proposed Facility is expected to be located on land that is zoned for agricultural use and is expected to occupy approximately 40 acres.  Exhibit 1 at 24.  No relocation of people or businesses is expected to  be necessary.  Id.  The proposed Facility would require no land use for water storage or a cooling system.  Id. at 25.  It would require minimal space for a maintenance facility for the storage of used oil and other lubricants, as well as for spare parts and tools.  Id.  Typical wind farms remove one-half acre of land from productive use for each turbine, or approximately 40 acres for the Project.  Id. at 24.  When access roads and a maintenance facility are considered, the Project’s land use would be consistent with typical wind farms.  The land requirements for electric power plants fueled by biomass depend on the characteristics of the individual facility, such as the size of the fuel storage and processing area, the amount of process water required, and the type of combustors and associated equipment and storage for solid waste.  Id.  Recently permitted biomass facilities in Minnesota have ranged in size from approximately 36 to approximately 90 acres.  Id; Exhibit 11 at 9.  When compared to the alternatives, the Project is consistent with industry standards regarding land use and will remove no more land from agricultural use than is necessary.

63.           The Applicant has stated that it will comply with MEQB Site Permit conditions that, among other things, preserve the wind resource on adjacent lands that are not a part of the Project footprint.  This will be addressed during the permitting process.  Exhibit 18, p. 29.

 

          Transportation and Traffic Requirements

64.           During Project construction, there is expected to be increased traffic on nearby county and township roads.  This increase in traffic is not anticipated to exceed the level of traffic that can safely be accommodated.  During the construction phase, several types of light, medium, and heavy-duty construction vehicles would travel to and from the site, as well as private vehicles used by construction personnel.  The existing state, county, and township road system should be adequate for ongoing access to the Project areas.  Low maintenance gravel access roads are proposed to be constructed for access to each turbine location during the Project’s construction phase.  Traffic generated during construction and operation of other wind energy alternatives would be expected to be the same as for the Project.  The amount of traffic generated by the construction of a biomass facility would be greater than that generated by construction of a wind farm.  The operations traffic generated by a biomass facility would depend largely upon the type and location of the biomass fuel, but it would be more than that generated by a wind farm because there would be more employees and the need for fuel delivery would be constant.  The transportation requirements of the proposed Facility and the traffic generated by it are expected to be no more than necessary and less than or equal to that of reasonable alternatives.  Exhibit 1 at 25-26; Exhibit 11 at 9-10.   

The Expected Reliability of the Proposed Facility Compared to Reasonable Alternatives.  [7849.0120.B(4)]

65.             The Project is comparable to all reasonable alternatives in terms of reliability.  Technological advances in turbine design and a better understanding of wind resources have produced major improvements in wind energy reliability.  The proposed facility’s turbines are designed to be available to provide energy to GRE 95 percent of the year.  However, the intermittent nature of wind resources typically requires other generating sources to back up the wind resource when the wind does not blow.  GRE already has a peaking plant installed that uses the same transmission facilities as would the proposed Facility, resulting in a complementary pairing of the proposed Facility with GRE’s existing gas-fired combustion turbine peaking facility.  Exhibit 1 at 9-10.

66.           The proposed Facility would use the most modern wind energy generating technology available.  Current plans are to use the 1.5 MW GE wind turbines, which are designed to operate at wind speeds between 3 and 25m/s.  The average 7.5m/s wind speed at the proposed Facility’s site provides an optimal match of energy resource to equipment technology.  This design would enable the proposed Facility to deliver energy at a very competitive price.  Id. at 10. 

The Proposed Facility Benefits Society in a Manner that Is Compatible with Protecting the Natural and Socioeconomic Environments, Including Human Health.  [7849.0120.C]

67.           The assessment of need criteria set forth in Minn. Rules 7849.0120.C require a determination that, by a preponderance of the evidence on the record, the proposed facility, or a suitable modification of the facility, will provide benefits to society in a manner compatible with protecting the natural and socioeconomic environments, including human health, and specifically considering the following:

(1)      the relationship of the proposed facility, or a suitable modification thereof, to overall state energy needs;

(2)      the effects of the proposed facility, or a suitable modification thereof, upon the natural and socioeconomic environments compared to the effects of not building the facility;

(3)      the effects of the proposed facility, or a suitable modification thereof, in inducing future development; and

(4)      the socially beneficial uses of the output of the proposed facility, or a suitable modification thereof, including its uses to protect or enhance environmental quality.

68.           The MEQB’s Environmental Report demonstrates that the proposed Facility is compatible with protecting the natural and socioeconomic environments.  Exhibit 18.

The Relationship of the Proposed Facility to Overall State Energy Needs.  [7849.0120.C(1)]

69.           Existing resources in MAPP beyond 2006 cannot meet the region’s capacity deficit.  Exhibit 20.  Additionally, MAPP and GRE have a need for economic renewable electric energy.  Exhibit 4.  Existing MAPP resources and recent additions to the pool have generally been fossil-fuel facilities.  Exhibit 20. Therefore, based on the REO, a need for renewable energy exists.  Exhibit 4.  The proposed Facility would fill such a need in a relatively economic manner, represent an important source of new capacity and energy for Minnesotans, and help to ensure that Minnesotans’ growing demand for electricity is met. 

70.           Given the projected deficits in electrical energy and generation capacity within Minnesota beginning in 2006, not constructing the Facility is likely to reduce the reliability of the electrical generation system in Minnesota.  Exhibit 1 at 7; Exhibit 20.  MAPP has been projecting a tightening balance of load and capacity for several years and the committed new generation projects that have been announced or pursued do not change that projection.  Exhibit20.

71.            Trimont’s Project is the winning proposal in GRE’s competitive bidding process for renewable generation.  Trimont’s proposal was for a 100 MW LWECS and nothing else.  GRE has agreed to purchase the entire Project output.  The purchase price would be lower than the $36/MWh that GRE is currently paying on the spot market, and lower than the average of $37.62/MWh that it projects it will need to pay in 2005 for the over 1,000 GWh of energy that it anticipates purchasing at various times throughout the year.  Exhibit 1 at 26.  Since there is little to no excess capacity in MAPP, the proposed Facility’s effect would be to make available to other utilities the spot energy that GRE will not need, due to its purchase of project energy from Trimont.  Exhibit 11 at 4.

The Effects of the Proposed Facility on the Natural and Socioeconomic Environments Compared to No Build.  [7849.0120.C(2)]

72.           The proposed Facility is designed to use wind power to generate electricity.  The result is expected to be a facility that will be environmentally friendly.  However, it would have some impact on the surrounding environment.  Exhibit 1 at 24-29; Exhibit 18. Whenever the Project’s energy displaces energy from fossil-fueled units, the environment would benefit through the elimination of greenhouse gas emissions.  Not building the Project would result in greater consumption of energy from sources with air emissions, something that would not be produced by the Project.  Exhibit 11 at 11.

73.           Negative effects on the natural environment would include some traffic and noise pollution during construction, and some noise pollution during operation.  These environmental effects are relatively benign and are subject to the permitting activity of various governmental agencies.  Exhibit 1 at 24-29, 32-33, Table 3; Exhibit 18.  Not building the Project would eliminate such negligible effects at the proposed location but would likely displace such effects to other generation locations.

74.           The MEQB’s Environmental Report confirms that the Project’s environmental impact is minimal, fundamentally benign, and does not represent a significant additional burden on the natural environment when compared to the No-Build alternative.  Exhibit 18.  A nearby landowner, whose property lies just outside the Project’s “footprint,” expressed concern about the Project’s effects on both the environment and land values.  He urged the Commission to take a “hard look” at the Project to be sure that there are no unforeseen negative consequences that would result from the Project.  He illustrated his concern by  comparing the Project to the widespread drainage of wetlands in the last century, which had unforeseen negative consequences, such as increased flooding and reduced habitat.  He admitted that he couldn’t identify any specific negative outcomes, but urged the Commission to examine the project for possible unforeseen consequences.  (Testimony of Tony Thompson).  The Environmental Report states that these types of concerns can be further addressed during the permitting process.  Exhibit 18, p. 29.

75.           The Project is expected to have socioeconomic benefits from the investment of approximately $120 million.  The Project is expected to provide 50 to 100 jobs during peak construction periods.  Exhibit 1 at 25.  The proposed Facility anticipates adding approximately three to five full-time equivalent positions to the local economy.  Id. at 28.  Additionally, it would contribute to the local tax base over its 30‑year life.  Not building the Project would mean that none of those benefits would occur.

76.           The Project would provide significant benefits to local communities in Martin and Jackson Counties, as well as additional tax revenues for the counties.  The Project’s structure would translate into local residents receiving economic benefits while at the same time providing added value to the Project.  The Project would also provide significant income opportunities to local landowner-member owners, area residents, and state and local government entities, while also providing a large supply of low-cost renewable energy with minimal impact on the environment.  Exhibit 1 at 11.

77.           The principal consequence of not building the Project would be to stall and encumber GRE’s ability to meet the REO.  Because the Project was the winning bid, GRE would be required to secure renewable resources to meet the REO by moving to more costly or less attractive renewable energy sources.  Exhibit 11 at 5.

78.            The development of wind energy in southwestern Minnesota has been important in diversifying and strengthening the area’s economic base.  When the Project’s minimal negative environmental impacts are considered in light of the fact that it would help GRE achieve the REO and provide economic stimulus to the local area, the Parties conclude that the Project’s societal benefits are evident and are superior to the No Build alternative.

The Effects of the Proposed Facility in Inducing Future Development.  [7849.0120.C(3)] 

79.           The Project would not have a significant impact on inducing future development in the Project region beyond the economic benefits associated with the Facility and potential expansions.  The availability of power is a prerequisite to development in general, but the Project is not tied to any development of a particular use, zoning category, or location.  Exhibit 1 at 15. 

80.           Additional wind energy infrastructure in the Project area would likely provide significant benefits to the local economy and local landowners.  Landowners in the Project area are expected to benefit from the participatory opportunities that the Project ownership structure affords them.  Additional wind energy infrastructure would also increase the local property tax base in the counties in which the Project is sited.  Id.

The Socially Beneficial Uses of the Proposed Facility’s Output.  [7849.0120.C(4)]

81.           Energy produced by the Project would provide significant, numerous, and varied societal benefits.  It would provide a substantial amount of renewable energy with minimal negative environmental impacts.  GRE has noted that the Project’s energy would be sufficient to meet the average needs for 29,000 households.  Exhibit 1, Appendix A.  Overall national security and energy reliability can both be enhanced through the development of diversified generation resources such as wind.  Exhibit 1 at 13.

82.           The Project would provide a supplementary source of income for local landowners and farmers in the form of wind easement payments and additional revenue received by the Trimont Area Wind Farm LLC members’ interest in the Project’s gross revenues.  Id. at 15; Exhibit 11 at 14.

83.           GRE has recently met its increasing energy obligations through purchases available in MAPP, paying approximately $36/MWh.  Exhibit 1 at 21.  Since there is little to no excess capacity in MAPP, the Project’s effect would be to make available to other utilities the spot energy from the other generation sources that GRE will no longer need, due to its purchase of the Project’s energy.  Exhibit 11 at 4. 

The Record Does Not Demonstrate that the Design, Construction, or Operation of the Proposed Facility Will Fail to Comply with Relevant Policies, Rules, and Regulations of Other State and Federal Agencies and Local Governments.[7849.0120.D]

84.           The assessment of need criteria set forth in Minn. Rules 7849.0120.D require that the record not demonstrate that the design, construction, or operation of the proposed facility, or a suitable modification of the proposed facility, will fail to comply with relevant policies, rules, and regulations of other state and federal agencies and local governments.

85.           The Applicant provided a list of the potential permits and approvals required for the construction and operation of the proposed Facility.  Exhibit 1 at 33-34.  There is no indication in the record that the design, construction, and operation of the proposed Facility would fail to comply with relevant policies, rules, and regulations of other state and federal agencies and local governments.  Id. at 11-14.

 

The Demand for Renewable Energy Cannot be Met More  Cost-Effectively Through Energy Conservation and Load-Management Measures and that the Need for the Proposed Facility Has Otherwise Been Justified.  [Minn.  Stat. Sec. 216B.243, subd. 3]

 

86.           Minn. Stat. § 216B.243, subd. 3, provides as follows:

No proposed large energy facility shall be certified for construction unless the applicant can show that demand for electricity cannot be met more cost effectively through energy conservation and load-management measures and unless the applicant has otherwise justified its need.

 

87.           The record demonstrates that GRE has explored, implemented, and continues to implement renewable energy,  energy conservation, and load-management measures and that the need for the renewable energy to be produced by the proposed Facility cannot be met through further expansion of conservation and load-management measures.  Exhibit 1 at Appendix A.

88.           The record demonstrates that there is a need for the renewable energy to be produced by the proposed Facility.  The addition of the proposed Facility’s output to GRE’s energy portfolio would substantially enhance GRE’s ability to provide its member-consumers with electricity generated by an eligible energy technology within the meaning of Minn. Stat. § 216B.1691 [Renewable Energy Objectives].

Based on the foregoing facts, the Administrative Law Judge makes the following:

CONCLUSIONS

1.       The Commission and the Administrative Law Judge have jurisdiction over this matter pursuant to Minn. Stat. § § 216B.243 and 14.50 (2002).  The Applicant and the Commission have complied with all substantive and procedural requirements of law and rule needed to enable the Commission to act on the Application.

2.       Based on the forecast testimony, the State’s Renewable Energy Objective, and MAPP’s surplus/deficit projections, there is a need for the proposed Facility.

3.       Increasing planned conservation and load management efforts are not a cost‑effective alternative to the proposed Facility.

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

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

6.       The proposed Facility would make efficient use of existing resources.

7.       Denial of the certificate of need would likely have an adverse effect upon the future adequacy, reliability, and efficiency of energy supply to GRE’s member‑cooperatives, to the people of Minnesota, and neighboring states.

8.       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.

9.       There is a growing demand for electricity in Minnesota, and additional sources of generation are necessary.

10.     The proposed Facility is needed to meet the growing electricity demands of Minnesotans.

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

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

13.     The Applicant has demonstrated that it has explored the possibility of generating power by means of other renewable energy sources and has demonstrated that the proposed Facility is less expensive (including environmental costs) than power generated by other renewable energy sources.

14.     The requirements for a certificate of need set forth in Minn. Stat. § 216B.243 and Minn. Rules Ch. 7849 have been satisfied.

Based on the entire record of the proceeding and the Findings and Conclusions above, the Administrative Law Judge makes the following:

RECOMMENDATION

That the Commissioner GRANT a Certificate of Need to the Applicant for the Project.

 

Dated this

14th

day of

April     

2004.

 

                                                                

/s/ Allan W. Klein

ALLAN W. KLEIN

Administrative Law Judge

 

Reported:  Tape-recorded.