Due to a federal appeals court decision in August to strike down the U.S. Environmental Protection Agency’s Cross-State Air Pollution Rule (CSAPR), Xcel Energy (NYSE: XEL) has been able to delay $470m worth of emissions controls it was planning to install in Texas.
Ben Fowke, Xcel Chairman, President and CEO, said during an Oct. 25 earnings call that previous guidance had included this $470m in capital spend by Southwestern Public Service. “We have removed the SPS environmental projects from our forecast following the court’s decision to vacate CSAPR,” he added. “The court stated that the EPA must continue administering [the Clean Air Interstate Rule] pending adoption of a valid replacement. At SPS, we plan to comply with CAIR through modest allowance purchases beginning in 2015.”
Longer term, it’s possible that future regulations could require the addition of selective catalytic reduction (SCR) and SO2 scrubbers at the SPS coal facilities, Fowke added. “However, because of the uncertainty of any additional regulations, including timing, these potential investments are expected to be beyond the current five-year forecast,” he added.
The SPS coal plants are the 1,018-MW Harrington and 1,065-MW Tolk facilities, both fired primarily with low-sulfur Powder River Basin coal.
Xcel’s updated capital forecast also reflects increased infrastructure investment, particularly related to natural gas pipeline integrity and electric distribution projects. Most of the larger projects, such as the CapX2020 transmission project, the Clean Air-Clean Jobs Act coal-to-gas conversions and coal shutdowns in Colorado, and a nuclear upgrade and life extension remain significant components of the five-year plan, Fowke said.
“I do want to point out that this forecast includes the Prairie Island upgrade project which represents about $200 million of CapEx spend primarily in 2016 and 2017,” he added. Earlier this year, Xcel filed a change of circumstance with the Minnesota Public Utilities Commission, because the benefits of this project had narrowed since it was originally proposed, he said. Circumstances have continued to evolve and now indicate that the benefits of the upgrade are less than the company anticipated in its March filing. “At this point, we conclude that further investment in the project will not benefit our customers,” he said. “The project is being reviewed by the commission, as well as other parties and we expect a determination sometime in 2013.”
In May 2008, Xcel’s Northern States Power unit proposed a 164-MW uprate project at Prairie Island costing about $322m to be implemented during Prairie Island’s 2014 and 2015 refueling outages.
As for the CapX2020 transmission project, the first four projects within that overall project representing approximately 700 miles and $1bn of capital investment for Xcel Energy have all received state regulatory approval and are now in the construction phase. Approximately one half of this project’s planned investment will be made in 2012 and 2013. In September, the second segment of the Bemidji-Grand Rapids transmission line was completed and energized, with the entire 70-mile line now in service. “Overall, the CapX2020 transmission project remains on time and on budget, demonstrating our continued ability to manage complicated projects and deliver value to all our stakeholders,” Fowke said.
Looking ahead, 2013 will be an active year, as Xcel plans to file several rate cases this fall. In early November, it’ll file a Minnesota electric rate case, which will reflect significant capital investment going into service associated with nuclear and other infrastructure projects, as well as the decline in electric sales experienced in Minnesota. Xcel also plans to make gas and electric filings in Texas, New Mexico, and North Dakota before the end of the year. All of which are in addition to open dockets in South Dakota and Wisconsin.