Minnesota Judge Rings in the New Year with Sunshine

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On December 31, 2013, Minnesota Administrative Law Judge Eric Lipman determined in a competitive bidding process that solar provided greater value to ratepayers than natural gas. In a first-ever competitive bidding process under Minn. Stat. §216B.2422, subd. 5, 4 bidders competed directly with Xcel Energy’s own natural gas proposal to fill an increasingly uncertain future need for capacity resources.  If the Minnesota Public Utilities Commission (the “Commission”) agrees with Judge Lipman, Edina-based Geronimo Energy will build 100 MW of solar energy across 20 different sites in rural Minnesota and additional procurement would be put off until better information is available for the timeframe beyond 2019.

The nearly 50 page decision is available here and outlines key determining factors. One of these factors was that circumstances had changed so dramatically since the Commission initiated the bidding process, it was no longer clear what capacity needs Xcel Energy will have in the relevant timeframe.  In early 2013, the Commission had initiated the process with the understanding (based on 2011 data) that Xcel may need approximately 150 MW of new capacity by 2017 and rising to 500 MW by 2019. Since early 2013, however, the Minnesota Legislature enacted a new solar energy standard, Xcel procured 750 MW of additional wind resources, the Midwest Independent System Operator revised its planning reserve margin process, and Xcel Energy continued to adjust downward its demand forecasting.

Given the uncertainty over Xcel's capacity needs, Judge Lipman determined that that it would be more prudent to acquire flexible and scalable projects to fill any near-term shortfall and then conduct a second procurement for  needs which may occur after the 2019 timeframe. He noted that while Xcel's capacity need may be uncertain, the utility's need to add solar resources to its system was not given the new statutory requirement to do so. Furthermore he determined that the solar proposal was the lowest cost when properly analyzed and posed the least risk of future noncompliance with state and federal policies, rules and regulations.

Judge Lipman also relied on a more than 2-decade old statute  (Minn. Stat. § 216B.2422, subd. 4) that requires the Commission to show preference for renewable facilities unless the utility demonstrates that doing so is not in the public interest.   In his memorandum, Judge Lipman explained:

“Finally, it bears mentioning that this procurement represents an important turning point in Minnesota’s energy resource planning process. Since 1991, Minnesota has had a statutory preference in favor of renewable energy sources. Yet that preference is overridden when the nonrenewable source has a lower total cost. Notwithstanding the statutory preference, it seemed that nonrenewable energy sources always won the head-to-head cost comparisons. Not anymore. Geronimo entered this bidding process as the sole renewable technology and beat competing offerors on total life-cycle costs. It deserves application of the statutory preference.”

Topics:  Competitive Bidding, Minnesota Public Utilities Commission, Natural Gas, Renewable Energy, Solar Energy, Wind Power

Published In: Energy & Utilities Updates, Environmental Updates, Government Contracting Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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