Xcel Energy reconsiders economics of Prairie Island nuclear uprate

An Xcel Energy (NYSE: XEL) subsidiary has filed a notice with the Minnesota Public Utilities Commission on its plans to re-examine the scope of a long-planned power uprate at the dual-unit Prairie Island nuclear plant.

Xcel reported that factors such as the low cost of natural gas and possible delays in U.S. Nuclear Regulatory Commission approvals following the 2011 Fukushima disaster in Japan has the company weighing other options.

Xcel’s Northern States Power (NSP) unit filed its documents with the PUC on March 30, saying that circumstances have changed since the utility first received its certificate of need for an extended power uprate for the nuclear plant. In May 2008 NSP proposed a 164-MW uprate project costing about $322m to be implemented during Prairie Island’s 2014 and 2015 refueling outages.

The PUC subsequently issued the certificate of need in December 2009. Now, however, NSP is having misgivings.

“While those changes alone would not have warranted a different decision by the Commission, other changes – such as our load forecasts, the costs of alternative resource options, and uncertainties now possible in the federal licensing process – could combine to lead to a determination that the uprate program is not cost-effective for our customers and should not be further pursued,” the company said.

As a result, the company is asking the PUC to “reaffirm” its support of the nuclear uprate before Xcel goes any further. The company requested that the commission provide an initial comment period of at least 60 days, with replies due 30 days afterward.

NRC approvals could delay uprates

NSP had assumed that NRC’s “license amendment request” would probably take 12-to-18 months. However, the recent addition of design detail required by the NRC has expanded the scope of the work, the company said.

“As noted in our 2010 Resource Plan update filing, the total project size is now estimated to be 135 MW because we determined that implementation of the low pressure turbine was not cost-effective,” the company said in its filing.

NSP now estimates project implementation during the 2016 and 2017 refueling outages, barring unforeseen delays. The company had also expected to file its license amendment request in early 2011, assuming it got NRC approval to extend the operating license for Prairie Island in late 2010 or early 2011.

“However, we did not receive that approval until June 2011, and NRC rules do not allow us to submit a LAR while a license renewal is pending,” the company noted. Also because of NRC’s post-Fukushima work the federal agency might require 30-to-36 months to review license amendments – rather than the traditional 12-to-22 months, Xcel Energy said.

If the review drags out 36 months, it will effectively prevent the company from implementing the uprate until refueling outages in 2017 and 2018. In addition to the NRC’s protracted approval schedule, NSP’s annual demand growth has slowed due to the soft economy.

All this is occurring at a time when increased domestic production of shale gas has depressed U.S. natural gas prices. “One of the benefits of the EPU [extended power uprate] is it acts as a hedge by reducing our exposure to natural gas prices and future environmental regulations,” NSP said. So falling natural gas prices will change the dynamic, the company said.

The Xcel subsidiary says $232m of the uprate cost can be saved if the PUC determines an uprate is no longer the best deal. As for Xcel’s overall prospective analysis it still finds a $50m benefit from the extended uprate as calculated by “present value revenue requirements.”

This is much less than the $278m benefit that the company had calculated earlier. Xcel also says that the current projection of a $50m benefit could shrink to only $20m if the uprates are delayed until 2019 and 2020.

No savings from the uprate program would result if natural gas prices over 20 years are $5.11/mmBtu or below.

Another wildcard in the equation is the chance of carbon dioxide legislation, which would make the nuclear uprate look better.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.