In the Matter of the Further Investigation into Environmental and Socioeconomic Costs Under Minnesota Statutes Section 216B.2422, Subdivision 3, OAH 80-2500-31888, MPUC E-999/CI-14-643, Minn. Office of Admin. Hearings.
Under Minnesota state law, the Public Utilities Commission (PUC) is required to "quantify and establish a range of environmental costs associated with each method of electricity generation," and utilities are required to use those costs "when evaluating and selecting resource options in all proceedings before the [PUC], including resource planning and certificate of need proceedings." In 1997, the PUC established final environmental cost values, after a contested case proceeding (first Externalities case). In 2013, environmental organizations filed a motion requesting the PUC to update the cost values for carbon dioxide (CO2) and recommended that the PUC adopt the federal government's Social Cost of Carbon (FSCC), developed by an interagency working group (IWG) pursuant to Executive Order 12866, as the cost value for C O2.
Because the PUC determined that a contested case proceeding was necessary to adequately consider the proposed CO2 cost values, the PUC filed a Notice and Order for Hearing (Notice and Order) with Minnesota's Office of Administrative Hearings, which set the scope of the reopened Externalities investigation and asked an administrative law judge to determine whether the FSCC is reasonable and the best available measure to determine the environmental cost of CO2 and, if not, what measure is better supported by the evidence.
First, regarding the appropriateness of models for calculating costs of CO2, the ALJ concluded that the PUC's Notice and Order required parties in the proceeding to evaluate the costs using a damage-cost approach (as opposed to market-based or cost-of-control approaches, for example), and that the models used to calculate the FSCC is a damage-cost approach consistent with the PUC's Notice and Order. However, the ALJ also concluded that, based on unreported and underreported health and environmental impacts, along with the IWG's acknowledgement that the FSCC is not based on the most current research, the preponderance of the evidence demonstrates that the FSCC understates the full environmental cost of CO2.
Second, regarding the geographic scope of damages resulting from CO2 emissions, the ALJ explained that Minnesota's statutory framework and the PUC's requirement that the parties use a damage-cost approach "compel that the question of the geographic scope of damages be viewed in terms of the source of the CO2 emissions and all their damaging impacts, wherever they are experienced." Thus, the ALJ concluded that a global scope for damages is required.
a. The FSCC values will be re-calculated to reflect a shortened time horizon extending to the year 2200.