The utilities proposing the Big Stone II project have underestimated the cost of building the coal-fired power plant, an independent report released this week said.

The report, prepared by Boston Pacific Co., said the utility groups proposing the project underestimated the cost of a possible carbon tax and overestimated the costs of alternative sources of energy.

Dan Sharp, communications manager for the Big Stone II project, said the construction costs provided by Boston Pacific are based on today's figures, while those by the Big Stone II applicants reflect $1.5 billion construction cost developed when the permit was submitted in 2005.

"We first submitted our cost estimates in 2005 - that's what you see in the report," said Sharp. "We included a 6-percent-per-year cost escalation - we don't feel there is a whole lot of difference in the construction of a coal plant in our estimate and what they recommend in the report."

The Minnesota Public Utilities Commission ordered the report from Boston Pacific Co. to help in its decision to approve or deny the transmission line project that would cross through western Minnesota. The proposed transmission line project would travel through the area including in Canby, Granite Falls and Marshall.

The proposed 580-megawatt Big Stone II project would be an expansion to an existing coal-fired power plant near Big Stone Lake in South Dakota, near the Minnesota border.

Sharp said the utilities need a total of eight permits in order to move forward with construction, including the transmission line permit the Minnesota PUC is currently reviewing.

Sharp said the utilities currently have five of the permits completed with two more expected to be finalized shortly.

Sharp said they are continuing to work on obtaining the permits to build the transmission lines.

"Big Stone II is our customers' less costly option; probably our most costly is buying on the wholesale market," said Sharp. "It won't be to our customers' advantage to have this plant delayed any longer."

The project is proposed by five utility groups, including Otter Tail Power and Missouri River Energy Services, which has a contract with Marshall Municipal Utilities.

Beth Goodpaster, clean energy program director with the Minnesota Center for Environmental Advocacy, said the report is consistent with complaints from project opponents.

"This was another set of eyes looking at the facts in this case and they reached similar conclusions that we've been reaching over the years here," said Goodpaster.

Goodpaster said the Big Stone II utilities have been inaccurately depicting the costs associated with alternative sources in favor of the coal-fired model.

"They were skewing their analysis of natural gas and wind power generation in favor of the Big Stone II project," said Goodpaster.

Boston Pacific also included a section in the report about a possible future carbon emission tax.

The report said the utilities might not have addressed the issue to its fullest.

"By using estimates of up to $9 a ton (or even $30), unescalated, the applicants have not performed what we would consider an appropriate ("best practices") analysis of emissions cost risk," the report said.

Sharp said the figure of $9 a ton came from the Minnesota Department of Commerce prior to a figure recommended by the Minnesota PUC.

"In September 2007, what was then called the Minnesota Department of Commerce, recommended that utilities in planning a cost of carbon dioxide emission to use a $9 per ton cost.

"In December 2007, the Minnesota Public Utilities Commission recommended utilities they regulate in the state use a range of $4 to $30 per ton. We used the $9 per ton and after, we did the modeling."

Sharp said the figures provided in the Boston Pacific report aren't in line with current legislation.

"The Boston Pacific report included a range of carbon costs from $8 to $60, but it taxed every ton of carbon emissions - that is not what the prevailing legislation in Congress would do," said Sharp.

"We don't feel that Boston Pacific was accurate in taxing every ton of carbon dioxide emitted, when Congress is looking at a cap and trade."

In an Associated Press story released Thursday, Minnesota PUC Executive Director Burl Haar said the utilities and others can respond to the report at a hearing on Nov. 12, and the commission will take up the issue next in mid-January.

In May, two administrative law judges recommended against allowing transmission lines from the plant to be built in Minnesota.

At the time of the ruling, the judges said the applicants had failed to show the need for electricity couldn't be better met by other forms of generation, including wind power.

Officials in South Dakota have already approved the permit for the construction of the power plant itself.

The full Boston Pacific report is available at the Minnesota PUC Web site at www.puc.state.mn.us.