Minnesota commission to take comment on Sherco coal study

The Minnesota Public Utilities Commission will be taking comment until Oct. 1 on a recent life cycle management plan from Xcel Energy (NYSE: XEL) that said the coal-fired Sherburne County (Sherco) Units 1 and 2 are economic and should stay in the company’s long-term plan.

Parties may file comments on whether Xcel’s Sherco study complies with the requirements set forth by the commission’s Nov. 30, 2012, order in the resource plan. Parties may also comment on the reasonableness of Xcel’s reference case assumptions used in the Sherco study, said a July 15 notice from the commission.

Parties can also submit recommendations, within the scope of the Sherco study, to be addressed in Xcel’s 2014 Integrated Resource Plan, which is scheduled to be filed Feb. 1, 2014. They can also comment on whether the Feb. 1, 2014, deadline for Xcel’s next resource plan should be modified, given the timeline of Xcel’s competitive resource acquisition process.

On July 1, Xcel Energy filed its Life Cycle Management Study for Sherco Units 1 and 2. The study was ordered to examine the feasibility and cost-effectiveness of continuing to operate, retrofitting, or retiring Sherco 1 and 2. The study assesses the impact of recently finalized and likely forthcoming EPA regulations and provides cost estimates of the pollution control equipment which could be required at Sherco 1 and 2.

The Sherco generating facility in Becker, Minn., is the company’s largest power plant in the Midwest, with its three units capable of providing a total of 2,400 MW. Units 1 and 2 have a production capability of 750 MW each and provide about 20% of the electricity used by Northern States Power’s Minnesota customers each year. Unit 3 is bigger and newer, so it didn’t fall into this analysis.

“Sherco’s size, age, role in our generation fleet, and existing pollution control investments differentiate it from other coal-fired power plants in Minnesota that have been retired or are scheduled to be retired in the next few years,” said Northern States Power, a unit of Xcel, in the life-cycle analysis.

The company said in the July 1 filing that it has completed extensive modeling, thoroughly reviewed the status of environmental regulation, and engaged stakeholders of various backgrounds and perspectives. The company used the Strategist resource planning model to evaluate the cost of retrofitting the units with additional pollution control equipment or retiring them. The retrofit scenarios evaluate the installation of Selective Catalytic Reduction (SCR) equipment for NOx control, while the retirement scenarios evaluate replacing Sherco 1 and 2 with new natural gas generation, renewable energy, and conservation or a combination of those options.

The modeling results show that when the anticipated direct costs to operate Sherco 1 and 2 (including SCRs) are compared to the alternatives, continued operation of Sherco 1 and 2 is clearly the most cost-effective option, the utility wrote. “Only a significantly lower forecast of natural gas prices or a much higher forecast of coal prices calls that conclusion into question,” it added.

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.