Montana-Dakota Home » Rates & Services » Electric Generation » Generation Retirement Plans

Montana-Dakota Utilities announced in February 2019 that it intends to retire three aging coal-fired electric generation units at two locations within the next two to three years and construct a new simple-cycle natural gas combustion turbine to cost-effectively meet the needs of its 143,000 electric customers located in North Dakota, South Dakota and Montana.

The analysis done while preparing the integrated resource plan (IRP), which the company puts together every two years and files with regulatory commissions, points to the retirement of two aging coal-fired plants and the construction of the natural gas combustion turbine. Low-cost power available on the market, due to low-cost natural gas and increasing wind resources, as well as rising costs to operate these facilities, led to the decision to retire the coal plants. The retirements are expected around the end of March 2021 for Lewis & Clark Station in Sidney, Montana, and around the end of March 2022 for units 1 and 2 at Heskett Station in Mandan, North Dakota.

lewis and clark station
Lewis & Clark Station
Heskett Station
Heskett Station
  • Lewis & Clark went online in 1958 with a capacity of 44 MW
  • Heskett 1 went online in 1954 with a capacity of 25 megawatts; Heskett 2 went online in 1963 with a capacity of 75 MW
  • Fuel source for all three units is lignite coal
  • Montana-Dakota intends to build a second natural gas simple cycle plant on the Heskett site to replace the coal-fired generation; the plant will be similar in size to the existing 88-megawatt simple cycle plant that went online in 2014.

Simple-cycle peaking unit under development

The company has begun the development process to construct an 88-megawatt simple-cycle peaking unit at the Heskett Station site. On Aug. 29, 2019, it submitted an advance determination of prudence request with the North Dakota Public Service Commission. See the company’s news release on the filing.

The new generation resource was selected as part of Montana-Dakota’s IRP. The company believes a second combustion turbine at Heskett will be cost-effective because the site has existing infrastructure and natural gas supply that serves an existing combustion unit that went online in 2014. The company also has two natural gas fired combustion engines at the Lewis & Clark Station site that will remain in operation. See the Electric Generation page for more information on the company’s electric generation fleet.

The company’s main objective is to provide customers with safe, reliable and low-cost service. The IRP process helps guide the company in making decisions to meet those objectives. Heskett and Lewis & Clark have met that objective for many years, but the analysis is showing those units are no longer cost competitive for our customers.

The total cost of building and operating a new simple-cycle combustion turbine, coupled with market purchases, is expected to be about half the total cost of continuing to run the Heskett and Lewis & Clark coal-fired units.

 

Older coal units no longer efficient

The first coal-fired unit at Heskett went online in 1954 and the second unit in 1963. They combine for 100 MW of power. Lewis & Clark went online in 1958 and provides 44 MW of power. If the company meets the proposed retirement timeline, the plants will range in age from 58-67 years old.

The units have served customers well, providing low-cost energy for many years, operating roughly twice as long as expected when they were constructed in the mid-1950s and early 1960s. The age of the units, low-cost competition on the market, and the ongoing cost to operate them all have contributed to the units being too expensive to operate much longer.

 

Integrated resource plan

Montana-Dakota has conducted an IRP for many years. The IRP is a way to consider all resource options reasonably available to meet the end-use customer’s demand for reliable and cost-effective energy, and provide a road map for Montana-Dakota’s future resources. The IRP process includes four areas: Load forecasting, demand-side analysis, supply-side analysis, and integration and risk analysis. A summary of the 2019 IRP study results is provided in the following PDF files:

MDU 2019 IRP Vol. I

MDU 2019 IRP Vol. II

MDU 2019 IRP Vol. III

MDU 2019 IRP Vol. IV

 

MISO energy market

Montana-Dakota’s customers also have benefited from low-cost energy available on the MISO market and the long-range forecast calls for similar savings in future years. MISO, or the Midcontinent Independent System Operator, is a not-for-profit member-based organization that ensures reliable, least-cost delivery of electricity across all or parts of 15 U.S. states and one Canadian province. In cooperation with stakeholders, MISO manages approximately 65,000 miles of high-voltage transmission and 200,000 MW of power-generating resources across its footprint.

Click here for more information in MISO.

Click here for more information on Montana-Dakota and MISO.

Frequently Asked Questions

Why are you closing the plants?

As we worked through the 2019 Integrated Resource Plan, it became evident that replacing these units with a simple cycle combustion turbine was the best option for our customers. The main drivers – low-cost natural gas and low-cost power on the MISO market, as well as rising coal costs, led to the decision to retire two aging coal plants, Heskett and Lewis & Clark.

When will the plants close?

We originally targeted the closing of the plants in conjunction with the expiration of the facilities’ coal contracts but have extended operations by about three months at both locations. Lewis & Clark would retire around the end of March 2021 and Heskett around the end of March 2022. If we meet that timeframe, Heskett 1 will have been in operation for 67 years, Lewis & Clark 62 years and Heskett 2 for 58 years.

What is an IRP?

The purpose of integrated resource planning is to consider all resource options reasonably available to meet the end-use customer’s demand for reliable and cost-effective energy, and provide a road map for Montana-Dakota’s future resources. The IRP process includes four areas: Load forecasting, demand-side analysis, supply-side analysis, and integration and risk analysis.

What other factors were used in the IRP process?

Montana-Dakota issued a Request for Proposal (RFP) for capacity and energy as part of the process. Several projects were submitted and reviewed; however, none were selected for various reasons. The projects did show that a combined cycle natural gas project that we were considering was not competitive with at least some of the wind and/or solar with storage proposals, as well as the MISO market.

What is MISO?

Montana-Dakota is a member of the Midcontinent Independent System Operator, or MISO, which is a not-for-profit member-based organization that ensures reliable, least-cost delivery of electricity across all or parts of 15 U.S. states and one Canadian province. In cooperation with stakeholders, MISO manages approximately 65,000 miles of high-voltage transmission and 200,000 megawatts of power-generating resources across its footprint.

Why a second simple cycle natural gas unit?

The models that were run as part of the IRP process pointed to this option as the lowest cost option for our customers because the Heskett site has existing infrastructure and natural gas supply.

Aren’t coal-fired plants generally the most economical option?

Previously, coal-fired generation was among the most economical method to generate electricity. However, the market has changed. With the influx of low-cost natural gas and wind resources, Heskett and Lewis & Clark are no longer the lowest cost option for our customers. The age of the plants, operation & maintenance costs and the cost of coal all contribute to the plants being not competitive in the MISO market. The plants have served customers well, providing low-cost energy for many years, operating roughly twice as long as expected when they were constructed in the mid-1950s and early 1960s. The landscape has changed due to lower natural gas prices and the economic feasibility of renewable energy.

What is the cost difference to run Heskett and Lewis & Clark versus a combustion turbine and MISO market purchases?

The total cost of a new simple cycle combustion turbine, coupled with MISO market purchases, is expected to be about half the total cost of continuing to run the Heskett and Lewis & Clark coal-fired units.

What is the plan for employees?

We currently have 77 employees between the two locations – 30 at Lewis & Clark and 47 at Heskett. Once the coal plants are no longer in operation, 12 employees will operate the two natural gas fired units at Heskett and the two natural gas fired combustion engines at Lewis & Clark. A plan is in place intended to maintain staff until the plant retirements and will offer training for employees who wish to fill open positions in other areas of the company. We would like to keep some employees on site to do the early stages of the decommissioning work, which likely take three to six months.

Are customers at risk for potential price spikes in the MISO market?

The market provides a diverse portfolio of generation options, which helps mitigate price spikes.

Why did the company make big investments in the coal plants just a short time ago if the plants were aging and not economical?

The investments were prudent when we made them. The company went through a thorough vetting process within its IRP development in 2013 and 2015, and in each instance, it showed that investing in the current plants was the best-cost option for our customers, even over a short period of time. What we have found through our 2019 IRP process is that continuing to operate these units is no longer the lowest-cost option into the future.

Could the plants retire sooner than the targeted dates?

There are circumstances that could dictate an earlier retirement, such as a major equipment repair that is not cost effective, a disruption in our coal supply via a coal mine closure or failure to retain employees necessary to continue operations.

Will your decision force the closure of Westmoreland coal mines?

We cannot speak on behalf of Westmoreland.

Are your recent investments in wind the reason for these retirements?

No. Our addition of Thunder Spirit Wind in 2016 and Thunder Spirit Wind 2 in 2018 were selected through our Integrated Resource Plan process as the best-cost option for our customers to meet our energy and capacity needs. The investments displaced additional market purchases that we forecasted to make.

Did you try to sell the plants / would you be willing to sell the plants?

Our thorough analysis shows the plants are not cost-effective to operate. We did reach out to neighboring utility companies and cooperatives and none were interested.

What is the time frame for the new simple cycle plant?

We filed on Aug. 29, 2019, with the ND Public Service Commission an advance determination of prudence request. If all regulatory and permitting requirements are met, it could be commissioned by early 2023 and ready for the 2023 MISO year, which begins June 1.

Are you getting out of coal completely?

No. We still are co-owners of coal-fired generation in a plant in North Dakota, a plant in South Dakota and a plant in Wyoming. Our company-owned generation portfolio in regard to capacity would change as follows once the retirements are complete and the new combustion turbine is in operation:

Source Current 2023
Coal 48% 31%
Natural Gas 25% 41%
Renewable 27% 28%

 

In regard to energy, the portfolio would change as follows:

Source Current 2023
Coal 51% 34%
Natural Gas 0% 0%
Renewable 21% 21%
Market Purchases 28% 44%