Calpine seeks Mankato power deal with Northern States Power

The Minnesota Public Utilities Commission will be looking at its Oct. 25 meeting whether to order the Northern States Power Co. (NSP)-Minnesota unit of Xcel Energy (NYSE: XEL) to seek outside power, like from Calpine Corp. (NYSE: CPN), as it looks to replace to-be-shut coal capacity at Black Dog Units 3-4.

Commission staff on Oct. 18 filed with the PUC a pre-meeting briefing paper on the case that outlines the views of Xcel and various parties to the case, including independent power producer Calpine.

In early 2011, Xcel Energy petitioned the commission for a Certificate of Need for the Black Dog Repowering Project. The proposed project consisted of replacing the remaining coal-fired Units 3 and 4 at the plant (about 250 MW of capacity in total) with about 700 MW of natural gas-fired, combined cycle generation located in what is now the coal storage yard, for about a 450-MW net increase in capacity.

As part of the proposed project, Units 3 and 4 would operate solely on natural gas starting in 2013 and during the construction of the new facility. In 2016, Units 3 and 4 would be shut down after the new combined cycle facility is placed in service. Other generation units onsite (which are not part of this project) include a natural gas-fired combustion turbine-generator (Unit 5) and an associated heat recovery steam generator (Unit 2). Units 5 and 2 have a combined summer rating of 283 MW.

In December 2011, Xcel filed a motion to withdraw the Black Dog Certificate of Need (CN) application based on updated demand forecasts and filed an integrated resource plan update in December 2011. In that update, Xcel indicated that its updated resource plan builds on elements from the initial resource plan and would include, among other items, withdrawing the request for a CN for the Black Dog repowering, reassessing the timing and need for additional combined-cycle generation as part of its next resource planning cycle and the retirement of Black Dog Units 3 and 4 by 2016.

In July 2011, Calpine filed an alternative proposal with the commission, for a 350-MW expansion of Calpine’s existing Mankato Energy Generation Station. In December 2011, Xcel Energy filed a request to withdraw its application for the project. Both Calpine and the state Department of Commerce filed written objections to the request for withdrawal. On May 30 of this year, an administrative law judge approved the withdrawal. On July 6, the commission issued a notice of public comment period on the ALJ’s May 30 order.  Only the department, Calpine and Xcel filed initial and reply comments.

Xcel believes that the Black Dog Docket should be resumed within the resource acquisition process with the appropriate adjustments in scope. Xcel’s comments noted agreement with the department’s analysis and recommendation that 400 to 600 MW of new natural gas generation in the 2017-2018 timeframe represented a reasonable target for resource additions. However, Xcel provided a slightly revised recommendation; that the commission (in the Resource Plan Order) should determine a natural gas resource need of about 400 to 600 MW in the 2017-2019 timeframe is reasonable to allow for the possibility of 2019 in-service dates. Xcel’s further analysis found that a potential capacity deficit of 120 MW-450 MW exists in the 2017-2018 timeframe and grows to up to 550 MW in the 2019 timeframe.

Also, Xcel did not agree with the department that at least half of the natural gas capacity should be combined cycle. Xcel indicated that the type of capacity, combined cycle or combustion turbine would be better decided in the competitive acquisition process. Xcel believes that the resource acquisition process would examine actual proposals to meet the identified resource need. And following that process, more informed decisions can then be made based on actual proposals as opposed to assumptions.

Xcel seeks commission finding of need for new power

Xcel believes the competitive resource acquisition process need not wait for the next cycle of planning. Xcel requested that the commission coordinate the Black Dog CN Docket with the Resource Plan Docket to better address all factors that may impact generation.

Therefore Xcel is asking the commission to:

  • Identify in the Resource Plan Docket a need for 400 to 600 MW of natural gas-fired intermediate and/or peaking generation in the 2017-2019 timeframe.
  • Direct the resource acquisition process in the Black Dog Docket be resumed with the appropriate adjustments in scope to reflect the identified need. Revised proposals by the parties should be allowed and submitted simultaneously on a set date.
  • Request the ALJ establish a procedural schedule in the contested case proceeding that schedules a date by which the revised proposals shall be submitted.
  • Include an ordering point that requires the hearing officer provide a protection order that defines disclosure terms.

The department and Xcel agreed that continuing with the Black Dog Docket, with revisions, is an appropriate course of action. The department explained that closing the existing Black Dog Docket would simply slow the process without any benefit and therefore recommended that the docket remain open.

Calpine, among other things, commented that expansion of the Mankato Energy Center is the only formally proposed project on the table and absent any further procedural delay can demonstrably attain a 2017 commercial operation date. Calpine also recommended that the Resource Plan Docket should include a requirement to solicit proposals for additional gas-fired capacity beyond what can be provided by a Xcel-Calpine power purchase agreement (PPA). Calpine reiterated its request that the commission close the Black Dog Docket and order the procurement of additional capacity resources in the context of Xcel’s pending Resource Plan Docket.

Commission staff said it believes there are two options for the commission at this point. The Black Dog CN Docket can continue in a modified form or the commission can terminate the proceeding (with the expectation that Xcel would refile a new certificate of need petition with a new project proposal). “Staff believes that both paths would have similar outcomes and the main differences would be the time required for each option (more time would be required to restart the process) and the initial requirement for solicitation of competing bids,” it added. “However staff believes the solicitation of bids could also be completed in the context of a modified Black Dog proceeding. The Commission could elect whether to accept outside bids (as noted by the Department in their initial comments) other than Calpine’s and Xcel’s during the timeframe it permits for Xcel and Calpine to revise their proposals within a modified proceeding.”

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.