MILI111/1 1.111110,2 

Minnesota Municipal Utilities Association 

Preliminary Comments of 

Minnesota Municipal Utilities Association 

On 

Proposed Carbon Pollution Guidelines 

For Existing Stationary Sources 

July 30, 2014 

EPA Listening Session 

Denver, Colorado 

Jack Kegel, Executive Director 

William Black, Director of Government Relations 

The Minnesota Municipal Utilities Association (MMUA) appreciates the opportunity to provide 

these preliminary comments to the EPA regarding its proposed carbon pollution guidelines for 

existing stationary sources. MMUA represents the interests of the 125 municipal electric 

utilities in Minnesota. 

Widely divergent state goals. The proposed rule produces widely divergent state goals, even 

among neighboring states. Minnesota is required to achieve a 41% reduction from 2012 levels, 

while Iowa is assigned a 16% reduction and North Dakota only 11%. The actions required to 

achieve the proposed reductions all have substantial costs, so consumers in Minnesota will 

have to bear a much higher financial burden than consumers in most of our neighboring states. 

We appreciate the difficulty of designing a nationwide program, but we also believe that it 

should be possible to modify the design of the program so as to place states on a more equal 

footing. 

Fair treatment of early adopters. The proposed rule places an undue burden on early adopters 

by not treating actions that result in reduced emissions of CO2prior to 2020 on an equal footing 

with those that take place in 2020 or later. The goal of the rule is to "achieve CO2emission 

reductions from the power sector of approximately 30 percent from CO2emission levels in 

2005.1'1 Ideally, all actions that reduce CO2emissions from the power sector during that period 

should be given equal weight. According to Table 6 in the proposed rule2, Minnesota 

1 79 FR 34832. 

279 FR 34868. 

3025 Harbor Lane North • Suite 400 • Plymouth, MN 55447-5142 • 763.551.1230 • 800.422.0119 (MN) • Fax 763.551.0459 • www.mmua.org 
generation was 18% renewable in 2012. Most of that renewable generation was added after 

2005 and should be treated the same as renewable generation added in 2025 if possible. 

The proposed rule does not properly take into account the fact that many states have 

renewable energy standards and/or energy efficiency requirements in place that will result in 

substantial reductions in CO2emissions from the power sector prior to the 2020-2030 period 

that is at the heart of the rule. In Minnesota for example, building blocks 3 and 4 of the 

proposed rule were put in place by our legislature in 2007. Similarly, many power providers 

likely have plans to retire fossil fuel units or bring on new renewable units prior to 2020. There 

is no logical reason to treat these actions differently than similar actions taken during the 2020-

2030 period. In order to provide some measure of fairness for early adopters and mitigate the 

wide variation in individual state goals, the interim goals should be based on actions taken 

during the period beginning in 2015 and extending through 20303. States should be permitted 

to include in their plans steps already in place that further the purpose of the rule. This 

modification will allow actions taken in the next five years to receive equal treatment with 

actions taken after 2020. 

Adjustment of Minnesota coal generation to account for SHERCO 3. Minnesota's newest and 

most efficient coal-fired power plant, SHERCO 3, was off line during all of 2012 due to a major 

outage. Minnesota's historic coal generation data relied upon in developing the rule is 

therefore abnormally low and must be adjusted to include the energy produced by the 884 MW 

SHERCO 3 plant in a typical year. Based on our preliminary calculations, including the typical 

generation from SHERCO 3 in the baseline for Minnesota coal generation produces a substantial 

change in Minnesota's interim and final goals. 

Operating combined cycle plants at a 70% capacity factor may not be feasible over the long 

term. We have very serious concerns about EPA's proposal to redispatch combined cycle plants 

to operate at an average 70% capacity factor. Based on the experience of Minnesota utilities in 

operating combined cycle plants, we believe that it will be impossible to maintain a 70% 

capacity factor for combined cycle plants over the long-term. We see this as a fundamental 

flaw in the structure of the rule that is destined to produce serious compliance problems and 

could substantially degrade the reliability of the nation's electric system. 

3If it would be impractical to redesign the entire program along these lines, the 15-year interim period could be 

provided as an option for early adopter states. 

2 
Outstate renewable generation developed by Minnesota utilities to comply with the 

Minnesota RES should be allocated to Minnesota. Much of the wind generation relied upon 

by Minnesota utilities to comply with the state's renewable energy standard is located in the 

Dakotas. This generation, developed or licensed by Minnesota utilities to meet the Minnesota 

RES, should be credited toward Minnesota's reduction in CO2levels. Minnesota officials have 

received preliminary confirmation from EPA that this will be the case. We support that 

determination and want to underscore the importance of it. 

The rule must provide a mechanism for accommodating substantial new development. The 

proposed rule provides no means of modifying the goals to account for major new industries or 

substantial economic development. Northeast Minnesota may see the development of two 

large nickel-copper mines and a major steel mill in the early 2020s. These projects will be going 

into an economically disadvantaged area and are sorely needed to maintain a healthy economy 

in that part of the state. It would be very difficult, if not impossible, to accommodate these 

major new loads and still achieve the very large reductions in CO2emissions mandated for 

Minnesota under the proposed rule. 

The proposed 10 year average lifetime for efficiency measures is appropriate. The proposed 

rule assumes an average electricity efficiency measure lifetime across all sectors of 10 years. 

We believe that this is a reasonable level and we support it. 

EPA needs to balance concern for the environment with reliability and cost. The proposed 

rule contains virtually no discussion of the impact of the proposal on reliability and cost to 

consumers. The analysis of costs and benefits takes into account "monitoring, recordkeeping, 

and reporting costs and demand side energy efficiency program and participant costs," but 

does not take into account increased costs to consumers as utilities pass on potential higher 

operating costs due to increased reliance on natural gas and the need to invest in new, 

potentially higher-cost technology to comply with the rule. Nor does it take into account the 

potential costs to society that may result from reduced reliability. 

The environmental benefits of the rule could well be counterbalanced by reduced reliability and 

substantial cost increases to residential consumers and businesses. Some potential courses of 

action may have lesser impact on reliability and/or price than others. Each potential action 

should be analyzed for its impact on reliability and cost as well as its impact on CO2emissions. 

4Table 1, footnote d, 79 FR 34840. 

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EPA must take into account issues raised by RTOs and reliability organizations. The bulk 

transmission system was designed to deliver power to load based on the current generation 

mix. Changing the mix of generation could impact the ability of the existing system to perform. 

Further, in our region states are not responsible for dispatching power plants. That 

responsibility falls to the Midcontinent Independent System Operator, our regional 

transmission organization. RTOs should report on the potential impact of the changes 

mandated by the rule on the transmission system. NERC and regional reliability organizations 

should be consulted regarding the potential impact of moving from economic to environmental 

dispatch. EPA should give serious consideration to any concerns raised by RTOs, NERC, and 

regional reliability organizations. 

EPA should develop a mass-based calculation and formula for states to use. Minnesota's 

regulators, like those in many other states, will be working on developing a mass-based 

formula. EPA should develop a mass-based calculation and formula for all 50 states to use to 

ensure uniformity and fairness among the states. 

Respectfully submitted, 

/4-ici, 

Jack Kegel 

William Black 

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