Xcel plans big spends on air compliance, Prairie Island uprate

Xcel Energy is busy with its capital improvement plans, including a March request that the Minnesota Public Utilities Commission reaffirm that increasing the generating capacity at the Prairie Island nuclear plant was in the best interests of customers, Xcel (NYSE: XEL) Chairman, President and CEO Ben Fowke said during an April 26 earnings call.

He said that Xcel is seeking a “reaffirmation” for this project, since the state commission issued a certificate of need for the Prairie Island uprate in 2009. Key changes since 2009 include a more lengthy approval process at the U.S. Nuclear Regulatory Commission, less expected incremental output from the plant to operate, higher project costs, lower natural gas prices, as well as lower demand growth, Fowke noted.

“When circumstances change significantly after an initial regulatory approval as with this project, our approach is to step back and take another look before continuing,” he added. “It’s prudent to have this review now rather than after completing the project. This is consistent with our focus on stakeholder alignment. We anticipate the Minnesota PUC will rule on this request later this year or early next.”

Fowke said that Xcel is also making good progress implementing its transmission strategy. Notably, the Minnesota commission granted the last siting and routing permit needed for the CapX2020 lines in Minnesota. The right of first refusal bill was signed into law in Minnesota. Xcel began phase II of the Fargo-St. Cloud line and the construction of the Brookings County-Hampton line and in Texas it reached a settlement for the route of the Tuco-Woodward line. “Clearly, our transmission projects remain on track,” Fowke said.

Another area touched on by Fowke was the status of Xcel compliance with various U.S. Environmental Protection Agency air rules that have a big impact on coal-fired power. “For example, in late 2011, EPA finalized its Mercury and Air Toxics Standards rule,” Fowke noted. “We’ll have to make some emission control investments under this rule [but] our cost of compliance is lower than the rest of the industry, primarily because of the actions we implemented over the last decade.”

EPA also proposed to approve the regional haze plan for Colorado this year. That plan incorporates Xcel’s Clean Air Clean Jobs Act emission reduction program, a plan which mitigates the cost of EPA regulations for customers. “As a result of our proactive environmental action, Xcel Energy is well positioned to meet various environmental challenges over the next decade,” Fowke said. “We believe our customers and shareholders had benefited from these actions.”

The biggest environmental challenge Xcel is currently facing is EPA’s Cross-State Air Pollution Rule (CSAPR). Because of its short compliance window, CSAPR was unusual and has had a significant impact on Xcel Energy and its customers, Fowke said. “As a result, we joined other utilities in several states in challenging the rule and seeking its stay,” he added.

In December 2011, a federal appeals court stayed CSAPR. Recently, the court listened to arguments over the legality of the rule. “We expect the ruling sometime this summer and remain optimistic that this litigation will result in better environmental regulation,” Fowke said. “Clearly, public policy will continue to impact our capital spend.”

Xcel’s five-year capital forecast includes about $470m for CSAPR compliance and $300m for the Prairie Island upgrade. The changes in timing or compliance with CSAPR as well as the Minnesota commission’s decision on the upgrade to Prairie Island could potentially reduce the capital forecast, Fowke noted.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.