The Biomass Mess

In 1994, the Minnesota legislature struck a deal that allowed Xcel Energy to store additional radioactive nuclear waste in above-ground storage casks located on Prairie Island in return for enacting a requirement that the energy company generate or buy a government-mandated percentage of biomass energy for their customers.  That compromise, forged between Republican Governor Arne Carlson and DFL legislative leaders Senate Majority Leader Roger Moe and Speaker Dee Long, put into place the Renewable Development Fund (RDF).  The RDF, financed by Xcel Energy customers in Wisconsin and Minnesota, forces consumers in those states to pay higher energy rates to fund millions of dollars of experimental energy projects.
According to a report featured on Minnesota Public Radio, Xcel has partially fulfilled this government mandate for the past decade by utilizing “50 megawatts of energy that has come from a plant (Benson Power formerly known as Fibrominn) in western Minnesota that burns [turkey] litter and other biomass, such as wood chips” into energy.  Another provider of Minnesota biomass to Xcel is wood chip boilers (Laurentian Energy Authority) located in Virginia and Hibbing, Minnesota.  These are just two of the long-term contracts Xcel Energy has with alternative energy providers in the state.  While funded by Xcel Energy ratepayers, contracts are made with these biomass producers after receiving recommendations from an independent, seven-member panel and approved by the state’s Public Utilities Commission.
Yet with 10 years left on their contract with Benson Power and Laurentian Energy, Xcel Energy is asking for legislative permission to be released from this very expensive mandate.  According to Rep. Pat Garafalo, chairman of the House Job Growth and Energy Affordability Policy and Finance committee, Xcel Energy customers are paying nearly $100 million per year for these experimental programs that Garafalo says, “just hasn’t worked.”
From the reaction contained in several news reports, this proposed legislation caught several of these biomass producers off-guard. These companies and the affiliated industries who provide them with turkey “waste” and other biomass products, have developed business plans based upon long-term contracts with the energy company.  Earlier this year, legislation was introduced in the Minnesota legislature to allow Xcel Energy to renegotiate existing contracts that remain with these alternative energy companies and to begin a smooth transition away from biomass energy production.  The legislation would have also ended the biomass mandate imposed by the state nearly 25 years ago.
The elimination of the mandate was included in the 2017 omnibus energy bill drafted earlier this year.  Recently the language that would have phased out the state’s biomass mandate was mysteriously stricken from the bill.  Worse yet, it was replaced by new language that would create a new biomass legislative advisory committee that would have the power to determine what RDF projects receive funding instead of the current (and independent) seven-member panel.  Instead of phasing out this expensive state-created energy mandate, some in the legislature now propose to morph it into a large legislative slush fund where members of the legislature would determine future biomass projects to be funded by Xcel Energy rate payers.  What could go wrong with that?

Twenty-three years later, the Renewable Development Fund represents nearly everything wrong about big government today:

  1. Rate-payers from Xcel Energy continue to pay higher electricity rates ($100 million per year) because of a deal cut in the legislature two decades ago to develop an industry (biomass) that doesn’t work as intended.
  2. Rather than cut their losses and move on, Xcel Energy has to phase out contracts with industries that didn’t exist prior to this government mandate.Ratepayers will continue to pay higher electricity rates until these contracts expire.
  3. A small group of very dedicated environmental activists forced their will on the majority of the state’s energy consumers 23 years ago.We continue to pay for that mistake.
  4. New defenders of the RDF have emerged (the communities where the biomass factories are located, for example) which makes ending the program problematic for elected officials; and,
  5. When all else fails, the legislature bails on full repeal of an unnecessary and costly regulation imposed by government and instead, creates a new slush fund for politicians to oversee.
  6. Even projects that fail don’t go away and can’t be eliminated.

American’s opinions of both political parties has dropped below their historical average ratings (you can read more about this below).  After watching the RDF mess in Minnesota, it’s easy to see why.

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