New Law Allows Xcel to Break Contract with Loggers

A new law allows Xcel Energy to use clean energy development funds to shut down multiple biomass power plants.

1

ST. PAUL, Minn. – Gov. Mark Dayton recently signed into law the omnibus jobs and energy bill allowing the Xcel Energy-managed Renewable Development Fund to be used to shut down three biomass power plants in Benson, Hibbing, and Virginia, Minnesota.

In 1994, Xcel Energy’s predecessor Northern States Power Co. wanted to expand their radioactive waste storage. The power company reached an agreement with the state, allowing an increase in nuclear storage in exchange for funding and development of clean energy alternatives. The Renewable Development Fund was created as a result of the agreement. Xcel was also required to use renewable sources, including biomass, for some of their energy production.

Following the mandate, investors created biomass plants in Benson, Hibbing, and Virginia, Minnesota. The Benson plant, Benson Power, burns primarily turkey manure along with some wood chips. The Hibbing and Virginia plants, owned by Laurentian Power Authority, burns wood chips. Xcel’s contract with Benson Power does not expire for another 11 years. Their contract with the Laurentian plants is up in nine years.

Despite committing to the long-term contracts, Xcel is anxious to find a way out of the deal. In a committee hearing earlier this year, Rick Evans, Xcel’s director of regional government affairs, told legislators the biomass energy costs customers too much, increasing utility bills as much as five percent.

The new law would allow Xcel to terminate their contracts with the biomass plants, therefore removing the biomass mandate. Money from the Renewable Development Fund would be used to compensate the communities affected by the shutdown. The clean energy fund will contribute $54 million for things like infrastructure improvements and job retraining.

The Benson, Hibbing, and Virginia communities are not the only ones affected by the shutdown. Loggers across the state are disgruntled by the new law, and are worried they will be without a job. As reported by the Star Tribune, the biomass plants purchased $27 million worth of wood chips each year. The shutdown leaves hundreds of logging companies without a buyer and potentially facing bankruptcy.

Dayton was also displeased with the change in policy, evident in his signature letter.

“This bill essentially rewrites that [1994] agreement by allowing Xcel Energy and the Legislature to have direct control of the RDF, while significantly obligating these funds over the next several years for non-renewable energy uses,” Dayton wrote. “These provisions effectively relieve the utility from having to meet the biomass mandate required by the agreement, to the detriment of much of Minnesota’s timber industry and management of public and private forests.”

Dayton signed the legislation despite his harsh criticism for the energy provisions.

Comments

comments