The Otter Tail case shows how Minnesota and North Dakota look at renewable energy differently

Otter Tail Power must exit a large coal-fired plant in North Dakota by 2032 — at least as far as Minnesota customers are concerned, state regulators ruled Thursday during a controversial meeting.

Hanging over the Minnesota Public Utilities Commission’s decision were the starkly different energy policies of Minnesota – which places a heavy emphasis on clean energy – and North Dakota, which is focused on preserving its coal industry and fleet of coal-fired power plants.

Dispute: Fergus Falls-based Otter Tail owns only 35% of a power plant called Coyote Station. Therefore, the plant could operate at partial capacity after 2031.

Otter Tail’s two largest power generators – Coyote and the other in South Dakota – are jointly owned by companies outside the purview of the PUC. About half of the company’s customers are also in the Dakotas.

Some PUC commissioners made clear Thursday that they believe Otter Tail should abandon the costly Coyote Station by 2029. Otter Tail argues that is not feasible given the interests of the plant’s co-owners.

“I find this to be an incredibly frustrating conversation,” PUC Commissioner Joe Sullivan said at Thursday’s meeting. “I feel sorry for Otter Tail, you have two different jurisdictions that look at the world differently. But if (Coyote Station) was in Minnesota, we’d say, ‘Otter Tail, it’s time to pull out.’

Sullivan added that the Coyote Station plant is “uneconomic.”

Coyote Station in Beulah, North Dakota, is also a particularly dirty coal plant, emitting far more sulfur dioxide, nitrogen oxide and mercury than any coal plant in Minnesota. Its depreciation lasts until 2040.

On Thursday, the PUC issued a ruling on Otter Tail’s latest long-term resource plan, which every investor-owned utility in Minnesota must file every few years. In 2021, Otter Tail presented a resource plan providing for the sale of its interest in Coyote Station by the end of 2028.

At the time, Otter Tail said the plant had become too expensive for customers and would no longer be needed as the utility provided more renewable energy. However, Otter Tail reversed course last year with a 2028 date, saying it needed to maintain its stake in Coyote Station indefinitely due to growing “uncertainties and risks.”

But the company has proposed using its stake in the Minnesota plant only if the Midwest’s main grid operator declares an emergency. Such emergencies occur during storms and heatwaves, when energy demand increases dramatically.

The Minnesota Department of Commerce generally agreed with the Coyote Station Otter Tail plan, while the Minnesota Attorney General’s Office did not. Both represent clients before the PUC. Several clean energy groups also opposed keeping the Coyote station open beyond 2028.

Earlier this week, Otter Tail officially changed its proposal, saying it would leave Coyote Station by 2031 — setting an end date for the first time after skepticism from the PUC and clean energy groups.

“We have limited options for recovering from parts of the Minnesota plant,” Cary Stephenson, an attorney for Otter Tail, told the PUC. “If we have a date too early, it creates a fire sell-off situation.”

Some PUC members expressed reservations about Otter Tail’s plans for Coyote Station. “All of the commissioners have really deep concerns about what you have brought to us,” said PUC Chair Katie Sieben.

However, the PUC approved exiting Coyote Station in 2031 – with several conditions – by a vote of 4 to 1. Sullivan cast a “no” vote.

On Thursday, the PUC also approved Otter Tail’s proposal to store liquefied natural gas at the gas-fired Astoria power plant in South Dakota. The purpose of the power plant is to improve reliability in the event of sudden increases in power demand; Otter Tail declined to disclose the cost.

The PUC also approved the installation of an additional 200 to 300 megawatts of renewable energy for Otter Tail before 2030. The PUC ordered Otter Tail to build 20 to 75 megawatts of battery storage by the end of 2020. Clean energy groups lobbied for battery storage, not Otter Tail.

Some commissioners were exasperated that Minnesota taxpayers could end up footing the entire cost of new renewable energy sources. An Otter Tail representative told the PUC that North Dakota regulators do not want to cover the costs of any new renewable energy sources before 2030.