Blaming rail congestion in the Upper Midwest, Minnesota Power has taken the "unprecedented action" of idling four coal-fired generating units totaling about 250 MW for the next three months while it attempts to amass an adequate coal supply for the coming winter, the company said Friday.
At least until December, the subsidiary of Duluth-based Allete will not operate two units representing 110 MW at its Laskin plant in Hoyt Lakes and two units totaling 140 MW at its Taconite Harbor facility in Taconite Harbor, spokeswoman Amy Rutledge said Friday.
"This is an unprecedented action for us to take," she said. "This is really the first time in our history" that coal units have been temporarily shuttered because of an inability to get all of the coal needed.
Coal deliveries from longtime shipper BNSF Railway are taking "two to three times longer than usual" to arrive at Laskin and Taconite Harbor, she said.
Al Rudeck, vice president of strategy and planning for Minnesota Power, said BNSF is citing congestion and adverse weather as the culprits for the lack of sufficient coal deliveries to Laskin and Taconite Harbor.
Strong grain and oil production in the region have tightened demand for railcars in recent months, he said.
Attempts to reach BNSF for comment Friday were unsuccessful.
Recently, coal shipments to Laskin and Taconite Harbor "have just slowed dramatically," Rutledge said. "BN had done a pretty good job through the spring in getting us caught up, but within the past couple of months we've seen this slowdown again."
By not running the utility's two smallest plants for a couple of months, "we'll be building up reserves" of low-sulfur coal from Wyoming and Montana in preparation for winter, she said. "We feel this approach is really protecting our customers against higher prices."
Minnesota Power burns about 6 million st of Powder River Basin coal annually, with most going to its largest plant, 1,000-MW Boswell, near Cohasset.
Boswell has sufficient coal to continue operating and, if necessary, existing stockpiles at Laskin and Taconite Harbor can be redirected to Boswell in the next few months, according to Rudeck and Rutledge.
Boswell also is Minnesota Power's least-cost plant.
While the four coal units are offline, Minnesota Power, in the Midcontinent Independent System Operator region, will be buying power from the wholesale market.
"We will have to replace that energy in the market, and this is a good time to do that because prices are relatively low," Rutledge said. "If we were talking about this happening in the winter months, prices would be much higher."
The fall months are considered a shoulder season separating periods of traditionally greater demand in the summer and winter.
If circumstances warrant, Rudeck said, Minnesota Power has the ability to return the Laskin and Taconite Harbor units to service ahead of schedule.
Minnesota Power previously announced plans to convert Laskin to natural gas under a project expected to begin in 2015. One of Taconite Harbor's three coal units will be retired, but the other two will continue to operate because they have been upgraded with pollution controls for mercury and other emissions.
Minnesota Power also is considering installing additional pollution controls on Boswell under a settlement with the Environmental Protection Agency that resolved alleged Clean Air Act violations by the utility.
The utility is gradually altering its generation mix. In 2005, it was 95% coal-fired. In 2014, it is 75% coal-fired and 25% renewables. Longer term, the generation portfolio is expected to consist of one-third coal, one-third renewables and one-third gas.
Minnesota Power serves about 144,000 customers, with the bulk of its load comprised of 11 major industrials, including taconite mines.
