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Big Stone II case centers on projections

ST. PAUL - The fate of an electric transmission line project in western Minnesota may rest on who regulators decide has better predictions.

Utility companies seeking to build a power plant in South Dakota and boost electric transmission capacity in western Minnesota say a coal-fired plant is the most cost-effective option. Opponents say the five utilities behind the Big Stone II project are relying on fixed construction costs and inflated predictions for alternative fuel source expenses.

Both sides base their arguments on projections and surveys, acknowledged Mark Rolfes, Big Stone II's project manager.

"It's obvious that there's going to be differences of opinion," Rolfes said in an interview Wednesday.

Rolfes was among witnesses called during the first of a three-day hearing in St. Paul on the Big Stone II project. Administrative law judges Steve Mihalchick and Barbara Neilson are expected to recommend to the Minnesota Public Utilities Commission whether to approve the utility companies' request for a certificate of need for the transmission project. Without that certificate, the project cannot move forward.

While Minnesota utility regulators only can weigh in on the transmission line request, the case is inextricably linked to the proposed South Dakota power plant. Debate over the project involves to what extent federal regulators may assess power plants that emit carbon dioxide, a greenhouse gas, and whether generating power from wind turbines or a natural gas-powered plant would be cheaper.

Opponents, led by the Minnesota Center for Environmental Advocacy, argue the utilities are using inflated national gas price predictions to justify a coal plant and do not take into account rising construction costs.

"They're creating a situation where their proposal for Big Stone II will still eke out on top," said Beth Goodpaster, the center's lead attorney in the case.

Otter Tail Power Co. executives and other expert witnesses for Big Stone II proponents said natural gas prices could nearly double over the next decade, and may escalate further if carbon regulation increases demand for natural gas.

"There is no viable alternative to offset Big Stone II," said Ward Uggerud, senior vice president for Otter Tail Power.

The transmission line case was directed to the administrative law judges after the Public Utilities Commission decided more information was needed on the companies' revised power plant project.

An earlier Big Stone II proposal included seven utility companies and a 630-megawatt plant, but proponents scaled back their plans last year after Great River Energy and Minnesota Municipal Power Agency backed out.

The latest plan calls for either a 500-megawatt or 580-megawatt plant that would be in operation by 2013. The proposed transmission lines that are the subject of the hearings have not changed with the smaller plant proposal.

Big Stone II proponents plan to upgrade an electric transmission line from the proposed plant near eastern South Dakota's Big Stone City to Morris in western Minnesota, tripling its capacity. They also would double capacity on an existing line from the plant to Granite Falls, south of Morris in western Minnesota.

Construction of those transmission upgrades and other power line improvements in Minnesota, North Dakota and South Dakota is estimated at about $250 million. Total cost for the Big Stone II project is $1.6 billion.

It could be April before the Public Utilities Commission determines the transmission line project's future.

"The PUC is the ultimate decision-maker," Rolfes said.

Also Wednesday, Big Stone II officials said in the past three months they have been approached by six firms interested in joining the project. They include both investors and Upper Midwest utility providers, said Dan Sharp, communications director for the Big Stone II project, but he and others would not name the interested firms.

Adding more utilities to the project would be more cost-effective for the companies' customers, Uggerud said, but the firms will not consider including more utility providers until after Minnesota regulators decide whether to approve the certificate of need.

Besides Fergus Falls-based Otter Tail Power, Big Stone II firms include Central Minnesota Municipal Power Agency, Heartland Consumers Power District, Missouri River Energy Services and Montana-Dakota Utilities Co.