Review of Two Minnesota Utilities' Unit Commitment and Dispatch Practices at Coal-Fired Power Plants

Sierra Club
Project Ongoing

On behalf of the Sierra Club, Synapse is providing expert comments and analysis in the Minnesota Public Utilities Commission’s investigation into the Self Scheduling and Self-Commitment practices of the state’s Coal-fired power plants.

In 2020, Synapse evaluated the unit commitment and dispatch practices of two Minnesota Utility companies: Minnesota Power’s two Boswell units and Otter Tail Power’s Big Stone and Coyote units.

Based on data and information submitted as part of the Companies’ 2020 Annual Compliance Filings, we found that both Otter Tail Power and Minnesota Power uneconomically self-committed and often appeared to have uneconomically self-scheduled their coal units throughout the 2020 reporting periods. Both utilities incurred significant losses (relative to the market price of energy) based on their unit commitment and dispatch decision-making processes. Otter Tail Power’s losses resulting from its commitment and dispatch practices were driven in large part by two factors:

(1) the Company’s decision to enter into a long-term fuel contract for Coyote at the mine that serves the plant (co-located with the mine) that designates a significant portion of its fuel costs as fixed costs; and

(2) the joint ownership structure and dual market operation of both the Big Stone and Coyote plants.

In 2021, Synapse evaluated Otter Tail Power’s units, focusing on the long-term coal contract and joint ownership structure issues outlined above. We evaluated the contract buy-out cost for Otter Tail Power to exit the coal contract at Coyote, and whether ratepayers would be better served by exiting the contract or continuing to operate the unit at a loss. We also reviewed actions the Company has taken to enable economic commitment at Big Stone, its plans to do the same at Coyote, and the challenges posed to attempting to implement fully economic operations based on the joint market and joint ownership at both plants.