Minnesota regulators defer question on carbon cost

[Story updated 3:02 p.m. with PUC decision]

The Minnesota Public Utilities Commission voted unanimously today to further study whether to adopt the Environmental Protection Agency’s social cost of carbon calculation.

The state’s Department of Commerce and Pollution Control Agency have both supported adopting the federal carbon price. Currently, the PUC uses carbon cost numbers established in 1997, years prior to new research that suggests the impact of carbon is much greater than previously thought, said J. Drake Hamilton, science policy director for Fresh Energy, the St. Paul nonprofit where Midwest Energy News is based.

However, commissioners raised concerns about adopting a metric from an outside agency without further deliberation. Today’s vote means the issue will go to the Office of Administrative Hearings to be argued before a judge. 

The decision does not take the EPA figure off the table. The intent of the hearing will be to determine whether the federal carbon estimate is the best measure, rather than to recalculate from scratch.

Hamilton said it’s unlikely such a process would offer a different outcome than the EPA arrived at after years of developing the federal figure.

“That would be a colossal waste of time and resources” for the PUC to make the price of carbon a contested case, Hamilton argued. “The commission now knows the numbers they’re using for carbon are wildly inaccurate and if they continue to use those numbers they are essentially wasting ratepayers’ resources.”

If the federal carbon price is approved, utilities going before the PUC with new projects will have to “take into account the right set of external costs,” she said.

Beth Goodpaster, an attorney at the Minnesota Center for Environmental Advocacy, called the PUC’s decision “extremely important” because many of its decisions involve a carbon estimate that “is ridiculously low.”

The Minnesota PUC has used a range from 42 cents to $4.37 a ton.

The EPA’s carbon cost — developed by 12 agencies using three models — comes to $37 a ton, with the amount expected to increase to $43, according to the Cost of Carbon Pollution report, a joint project of the Environmental Defense Fund, the Institute for Policy Integrity, and the Natural Resources Defense Council.

Utilities that offered comments suggested the EPA’s carbon price had substantial flaws and did not agree with the process used to determine it, according to a PUC staff report summarizing the docket. Some critics also said the use of the federal carbon price is not specifically designed for resource acquisition proceedings of the kind the PUC decides.

Also, Republicans in Congress have accused the EPA of improperly allowing the NRDC to influence the process.

The EPA number is “conservative,” said Hamilton, and probably could be higher if all externalities were taken into account.

“There was a very rigorous process using a conservative, multi-year model,” she said.

The PUC also voted to update the cost of three pollutants: nitrous oxide, particulate matter and sulfur oxide.

The values of these pollutants will be determined in an administrative hearing, Hamilton said, before being presented to the PUC for a determination. Depending on the PUC’s decision, carbon could be added to that list.

“This is an important component as well, the commission made a clear decision to update these values,” she said.

The PUC will also determine the scope of the administrative hearing and set up a process for the likely hiring of a consulting firm and for managing the testimony of the public, environmental groups and utilities.

The move to update the carbon estimate began when Fresh Energy and several other environmental groups asked the PUC to update external values last year, and on Dec. 19 the agency voted in favor of the proposal.

If the PUC eventually adopts the federal carbon figure, several utilities may change or adapt their long-range plans regarding coal-fired plants, said Michelle Rosier, senior campaign and organizing manager with the Sierra Club’s Beyond Coal Campaign and Minnesota Environmental Justice Program.

“It will definitely impact utility decision making,” said Rosier.

Fresh Energy, the EDF, the NRDC, the Sierra Club and the MCEA are members of REAMP, which also publishes Midwest Energy News.

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