Lignite Energy Council shouldn’t be funded by utility ratepayers, Minnesota Attorney General argues

Minnesota’s Attorney General thinks utility ratepayers should not be forced to fund the Lignite Energy Council, a coal industry group that has opposed clean energy policies in Minnesota and supported policies that subsidize the coal industry in North Dakota and nationally. 

The Minnesota Attorney General (AG)’s office submitted testimony to the Minnesota Public Utilities Commission last month objecting to Otter Tail Power’s efforts to charge its ratepayers for dues it pays to the Lignite Energy Council. The AG’s office explained that the Lignite Energy Council does not benefit electric ratepayers in Minnesota, and is instead focused on promoting North Dakota’s coal industry.

There are two issues with the LEC [Lignite Energy Council] dues. The first is that LEC is an organization that supports North Dakota’s $18 billion lignite industry and does not provide any direct benefits to Minnesota electric ratepayers. The second is that LEC engages heavily in public affairs and legislative activities in North Dakota, Minnesota, and with the US Environmental Protection Agency (“EPA”) to advocate for the lignite industry and coal based electricity. LEC’s activities are in direct opposition to Minnesota’s carbon-reduction goals and renewable energy standards.

Otter Tail Power is seeking to charge its ratepayers $47,545 for a portion of the annual dues it pays to the Lignite Energy Council.

Otter Tail Power responded to the Minnesota Public Utilities Commission, arguing that while its shareholders would pay for the portion of the Lignite Energy Council’s dues that it claims goes toward lobbying, ratepayers should have to pay for the rest.

The AG’s office noted that Minnesota Power removed its request to charge ratepayers for its funding of the Lignite Energy Council.

The AG’s office also objected to the utility’s payments to the “Clean Air Act Monitoring Service” and “Climate Legal Group,” two groups which appear to provide similar services as the Utility Air Regulatory Group, which disbanded in 2019 under Congressional investigation after decades of legal efforts to weaken Clean Air Act rules.

Utility ratepayers in Minnesota and beyond fund Lignite Energy Council

While the Minnesota Attorney General’s office focused on Otter Tail Power’s payments to the Lignite Energy Council, several other utilities that sell power in Minnesota, North Dakota, South Dakota, Montana, Wyoming and Iowa also pay dues to the coal industry group.

Lignite Energy Council members include three investor-owned utilities: Otter Tail Power, with ratepayers in western Minnesota and the Dakotas; Minnesota Power, with ratepayers in northern Minnesota; and Montana-Dakota Utilities, with ratepayers in the Dakotas, Montana and Wyoming.

Lignite Energy Council members also include three generation and transmission associations, which sell wholesale power to electric cooperatives with ratepayers in Minnesota, the Dakotas, Iowa, and beyond. Those generation and transmission associations are Great River Energy, Minnkota Power Cooperative, and Basin Electric.

While Otter Tail Power and the other investor-owned utilities generally must seek approval from public utilities commissions to charge ratepayers for payments to trade groups like the Lignite Energy Council, most generation and transmission associations are not regulated by state commissions. So those costs are ultimately paid by the ratepayers of the electric cooperatives that buy wholesale power from those generation and transmission associations, without regulatory oversight of that spending.

Coal mining companies and their suppliers are also members of the Lignite Energy Council. In its latest annual report, the Lignite Energy Council proposed that $1.9 million of its $4.35 million budget come from member companies’ dues, with the state of North Dakota paying for most of the rest.

Lignite Energy Council lobbies to keep running increasingly uneconomic coal plants

The Lignite Energy Council touts its success in blocking clean energy policies proposed in Minnesota, as well as its efforts to defend the coal industry in North Dakota and nationally. Its latest annual report highlights its “Government affairs successes” including its role in blocking “100 Percent Carbon Free by 2050 and Clean Energy First legislation in Minnesota,” and its support for the Trump administration’s efforts to replace the Clean Power Plan.

Earlier this month, the Lignite Energy Council also highlighted its role in helping to pass 18 bills in North Dakota aimed at defending the state’s coal industry, declaring that the “2021 North Dakota Legislative Session was the most productive pro-coal session in the history of the Lignite Energy Council.” One bill cuts the North Dakota coal industry’s taxes by more than $100 million over the next five years, while another directs the state’s insurance commissioner to consider how to respond to increased insurance premiums for the coal industry, as insurance companies incorporate the growing risks to the sector or begin to stop providing coverage.

The Lignite Energy Council is also navigating the shifting economics of energy resources in the region, as declining wind energy costs and low wholesale power prices undercut the costs of operating coal plants.

David Saggau, the CEO of Great River Energy, explained to the Lignite Energy Council in October that the power supplier lost $170 million in 2019 by operating the 1,151 megawatt Coal Creek Station, the largest lignite coal plant in North Dakota. Saggau said the plant cost $41.32/MWh to run in 2019, far higher than the ~$21/MWh average prices in the Midcontinent Independent System Operator (MISO) that year.

Saggau explained: “Despite all of these advantages that we have with Coal Creek Station, we lost $170 million in 2019 on energy sales, and looking forward we don’t see market conditions improving to a point where we could keep the plant operational.”

Great River Energy announced last year that it would close Coal Creek Station in the second half of 2022, but in March, North Dakota Governor Doug Burgum announced that Great River Energy was in “exclusive negotiations” with a potential buyer to sell the coal plant instead of closing it; the potential buyer has not been publicly named.

Economic pressure on North Dakota’s coal industry extends beyond the Coal Creek plant. A report published this month by Energy Innovation found that 80% of U.S. coal plants are more expensive than new wind or solar resources or are scheduled to retire in the next four years, and lignite plants in North Dakota were among those identified as more expensive than new wind energy.

The Lignite Energy Council has responded to that competition from wind energy by opposing policies that support the wind energy industry. The coal industry group’s CEO blasted the extension of the wind energy production tax credit, characterizing the bipartisan measure as “proof that Washington, D.C., is broken.”

Meanwhile, the National Rural Electric Cooperative Association (NRECA), American Public Power Association, and Large Public Power Council asked Congress in a letter this week to instead expand renewable energy tax credits to more directly benefit cooperative and municipal electric utilities by creating a direct pay option.

Great River Energy, Minnkota Power, and Basin Electric are members of both the Lignite Energy Council and NRECA, so millions of electric cooperative ratepayers are funding a coal industry trade association that wants to end a renewable energy tax credit, while also funding a trade association that wants to expand those same tax credits.

The Minnesota Attorney General filing highlighted a petition from the Center for Biological Diversity to the Federal Energy Regulatory Commission (FERC) that would make it harder for utilities to charge their customers for trade association dues, and argued that the “Commission should seriously evaluate membership dues and subscription fees to understand what types of activities they are funding. Only in that way can the Commission be certain that these costs benefit ratepayers and are reasonable for ratepayers to pay for.”