ALJ: Minnesota Should Use Federal Costs of Carbon in Decisions

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By Mark Wolski

April 19 — The Minnesota Public Utilities Commission is expected to decide sometime this summer whether to follow a state administrative law judge's recommendation that it use the federal government's Social Costs of Carbon in its decisions regarding energy generation.

Although noting several exceptions, Administrative Law Judge LauraSue Schlatter wrote that the PUC should use the federal costs when examining energy issues in the state. Under state law, the commission is required to quantify and estimate any energy-generating plant's environmental costs.

Leigh Currie, energy program director for the Minnesota Center for Environmental Advocacy (MCEA), one of the environmental groups that had asked the PUC to update the values set for environmental costs, said the decision could have a significant impact on energy generation in Minnesota. She said the ALJ's recommendations could make clean energy sources more competitive with coal-fired power plants.

PUC Required to Examine Environmental Costs

Minnesota law requires the PUC to examine environmental costs when considering energy production for the state. The law requires utilities to use the costs set by the PUC when evaluating and selecting their resource options.

The commission set environmental cost values in 1997. At the time, Currie said, the PUC said it would reexamine the values as more information on environmental costs became available. However, she said, the values haven't changed since they were set.

She said MCEA and several other environmental groups petitioned the commission in 2013, asking it to update the values. The groups also recommended that the commission adopt the Federal Social Costs of Carbon as a cost value for carbon dioxide.

Believing a contested case hearing was necessary to fully consider the proposed values, the PUC asked the judge to examine the values and determine whether the federal values were reasonable and the best available measure to determine the environmental costs of carbon dioxide.

PUC Urged to Adopt Values

The ALJ's extensive ruling, which details the different parties' arguments for and against the federal values, recommended that the PUC adopt the values, including the 2.5 percent, 3 percent and 5 percent discount rates.

Schlatter added that the values should be recalculated to reflect a shortened time horizon, extending to the year 2200. She also recommended that the PUC exclude the value derived from the 95th percentile at a 3 percent discount rate from the range of values.

J. Drake Hamilton, science policy director for Fresh Energy, another group that asked for the cost update, told Bloomberg BNA April 19 that the values have gone unchanged for a long time, probably because when they were set, they were very contentious, with coal groups from around the country objecting to them.

She said to get the PUC to reexamine the numbers, the environmental group petitioned and asked an economist at the University of Minnesota to provide a ballpark figure on health and environmental costs tied to carbon emissions. She said the estimated $2.1 billion annual cost likely opened some eyes at the PUC.

PUC Not Obligated to Follow Recommendation

She said while the PUC isn't required to follow Schlatter's recommendations, the ALJ's ruling does give the commission a body of evidence to use if it chooses to accept them.

She noted that the recommendations, if implemented, could increase the carbon values by 12 times to 25 times their current rates. Such increases, she said, could certainly affect power companies' decisions on the futures of their coal-fired plants.

Currie said interested parties now have 20 days to file exceptions to the ALJ's recommendations. Opposing parties would then have 10 days to reply to the exceptions, she said. The PUC would then likely take up the recommendations one or two months after all the filings have been completed, she said.

She added that MCEA would be filing exceptions, as it believes the federal values should be adopted fully, rather than implementing them with the minor changes recommended by the ALJ.

Utility Company Reviewing Ruling

A spokesman for Xcel Energy, Minnesota's largest power company, said the company is still reviewing the ruling to see how it would affect its operations. He could not say whether Xcel would be challenging any of the recommendations.

Officials with the Lignite Energy Council of Bismarck, N.D., were unavailable for comment.

To contact the reporter on this story: Mark Wolski in St. Paul, Minn., at

To contact the editor responsible for this story: Larry Pearl at

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