MEMORANDUM

To: Carbon Power Plan for Existing Power Plants; Docket id: OAR-2013-0602

From: Region 5, EPA

Summary: The following questions were submitted to EPA prior to a 7/21/14 conference call 

between EPA and Minnesota Pollution Control Agency about the proposed carbon power plan 

for existing power plants.
Questions for EPA, July 21, 2014

1. Will EPA consider comments on proposals that can better account for early action?

As we have pointed out to EPA in the past, Minnesota embarked on a CO2 reduction program 

awhile ago. NGCC plants Xcel Energy were built with the expectation that Minnesota would be 

better positioned for upcoming carbon regulation. These actions are not credited in EPA’s 

proposed rule due to the 2012 baseline. Further, the NGCCs installed under this program, which 

is cited in EPA’s rule as a success, also give MN a more stringent target due to the effect of 

Block 2. Overall, the treatment of these NGCCs under the proposal is a potential double penalty

for proactive actions by the MN Legislature, MN Public Utility Commission, and Xcel Energy to 

seek out coal plants for retirement and replace them with much lower-emitting NGCCs.

Beyond this, the NGCCs have also had lower capacity factors due to the integration of wind and 

use of DSM programs in Minnesota. A simple back-of-the-envelope calculation illustrates this 

impact. Minnesota had about 2733 MW of wind at the end of 2011, which would have generated 

about 7,900,000 MWH in 2012. If Minnesota had not built this wind, and half of that generation 

were instead sourced from the state’s existing NGCCs (which may be a conservative 

assumption), then Minnesota’s NGCCs might have operated at about a 40% capacity factor 

rather than 23.5% in 2012. Our utilities are looking further at this question and also at whether 

and how much DSM may have further decreased NGCC capacity factors. 

How can Minnesota account for customer conservation improvements that occurred before 

2012 if EPA chooses to not set the baseline used for determining State targets at a date 

early enough to credit early action?

2. Is EPA open to comment concerning methods to fix anomalous data for specific 

units such as Sherco 3?

Sherburne County Generating Station Unit 3 was down for all of 2012 due to an unplanned 

outage, making the starting point of Minnesota’s goal calculation atypical. This should be 

corrected, as Minnesota will continue to rely on this generating unit (approximately 900 MW) 

for the duration of the planning period, and likely beyond.

This points to the broader issue that basing state goals on a single base year cannot capture all 

sorts of variability of outages, fuel prices, weather, etc. that may affect generation and emissions. 

Would EPA consider a multi-year baseline period as the starting point for goal 

computation?

What is the preferred reference period, 2012 or June 2, 2014? EPA suggested that only those 

measures implemented after the proposed Clean Power Plan was released would count as “new” 

renewables or otherwise as new activity. Yet, EPA has determined EPA targets for a State while 

giving reference to 2012 State generation and emissions statistics, including the use of renewable 

generation. What is EPA’s reference point for separating new from existing action?
3. How can hydro power be accounted for in a state plan?

Minnesota utilities are entering into agreements with hydro generation in Manitoba or other parts 

of Canada as a means to reduce their emissions or replace other, more carbon-intensive forms of 

generation. EPA is clear that existing (pre-2012) hydro was not included in the denominator 

when setting state goals. However,

 Under what conditions would EPA consider counting generation from hydro 

installed pre-2012 (or pre-proposal) toward goal compliance after 2020?

 We understand new hydro acquired after 2012 (or after date of proposal) does in general 

count toward goal compliance. However could EPA please clarify whether a state that 

increases its RE generation portfolio by adding new hydro in Canada may count 

this toward goal compliance?

 What if a utility adds hydro to its generation portfolio by signing a new (postproposal) power purchase agreement, but this does not represent newly built hydro 

capacity, only a new PPA with existing facilities. Do the incremental MW count 

toward goal compliance?

4. Will EPA consider adjusting downwards Minnesota’s EE assumptions due to the 

age of the current program?

EPA’s proposal uses a final goal of 1.5% per year annual growth rate in new energy efficiency 

(aka DSM aka Conservation Improvement Program) measures. Minnesota has achieved similar 

levels of DSM performance in recent years. However, DSM programs face challenges in 

achieving similar levels of performance as ever-more efficient technologies enter the 

marketplace, or are required by federal standards, and thus become part of normal activities and 

not eligible for participation in a DSM program. We further note that EPA recognizes 

Minnesota’s ongoing achievements in DSM in Table 5-4 of the GHG Abatement Measures TSD, 

page 5-18, where Minnesota ranks fourth nationally in cumulative DSM performance at 13.10%. 

This achievement is based on significant DSM program activity since the 1980s in Minnesota. 

What evidence does EPA offer that a state like Minnesota, which has been driving the DSM 

market for so long, can continue to achieve 1.5% per year performance on a sustained level 

from 2020-2030? 

5. Minnesota is very interested in receiving proper credit for its generation located in 

North Dakota.

EPA has included the renewables in other States that the Minnesota RPS “counts” as counting in 

EPA’s tally of those other State Clean Power Plan emission rate targets.

How, specifically, can a Minnesota based RPS get incorporated into an EPA enforceable SIP?

How can Minnesota exercise “claims” to renewables built for Minnesota RPS requirements if 

EPA has structured that doing so will increase the burden for renewables in those other 

States? Shouldn’t EPA be giving relief to States by allowing recalculation of State targets if 

EPA’s basis for target setting is being modified by such matters?
Minnesota’s 2012 renewable percentage is 18% according to Table 6 in the proposed rule, and its 

target is 15% for the purposes of emissions reduction targets per the same table. We believe that 

the state received a target based on the 15% target.

 Can you please confirm that all of the existing and planned renewables are eligible 

toward compliance? 

 Also, can you confirm that Minnesota’s above-target renewables help the state for 

compliance even beyond the target levels? 

 Can you explain how this compliance step works in the rule?

 Do entities or generators that are used to reduce fossil generation meet the same 

provisions as those defined as “affected units”? That is, do they have to be 25 MW 

and provide 1/3 power to the grid, for example, can we use landfill gas-to-energy 

plants as part of our RE?

Credit for out-of-state renewable generation

 Assuming for the moment that states do not collaborate and submit regional plans, which 

state would be allowed to count newly built (post-proposal) renewable generation 

towards its compliance demonstration – the state where the renewable generation is 

located, or the state where the load it serves is located?

 The State Plan Considerations TSD indicates that a “state that implements the measure –

i.e., end-use energy efficiency and renewable energy regulations or programs, or an 

emission limit that addresses out-of-state generation – claims the avoided CO2 emissions, 

regardless of where they occur.” What happens if two states disagree on who gets to 

claim the emissions reductions benefits of a particular state action?

6. Are RECs like that provided by M-RETs going to be good enough to track 

renewable generation?

7. Minnesota is interested in accepting EPA’s offer to host a discussion focused solely 

on converting the rate-based goals to their equivalent mass-based goals.

We look forward to a discussion with EPA as soon as EPA is able to schedule it.

8. At-Risk Nuclear Power Capacity:

We are unclear about how EPA’s approach of accounting for at risk nuclear either improves or 

impedes overall CO2 reductions in the United States. Minnesota has two nuclear generating 

stations which have recently received approvals for uprates and operation extensions until 2030, 

at which time they are scheduled for shutdown. Can U.S. EPA provide a sample calculation of 

how preserved nuclear generation is accounted for in back-end compliance calculations? 

9. State Plan preparation

What type of documentation is necessary for supporting a state’s projection of future CO2 

emissions? Should we choose to use a mass based approach, can this mass be adjusted to 

account for changes in generation/demand?
If Minnesota was to create an in-state type of trading program between EGUs, are we able to 

include in the plan more EGUs than are currently defined in the rule as affected units (e.g. opt-in 

provisions).

10. Will EPA consider releasing a NODA?

Minnesota believes it would be really useful if EPA were to prepare a NODA that contains the 

state’s final goal and possibly a rate to mass conversion method prior to rule finalization. This is 

similar to how EPA acted with CSAPR.