The Minnesota Public Utilities Commission is taking public comment until Sept. 10, with reply comments due by Sept. 20, on an application by Northern States Power d/b/a Xcel Energy (NYSE: XEL) to alter a power purchase agreement (PPA) with a biomass project.
Xcel on July 26 filed a request for approval of the Second Amendment to the Second Amended and Restated Biomass PPA for biomass generation resources from the Laurentian project. This amendment modifies the purchase price of the energy from the project and adds a fuel cost adjustment beginning in 2014 over the remaining term of the agreement.
Also, the amendment provides that beginning with payments for 2012, Laurentian will be paid for all energy delivered to Xcel Energy under the PPA, subject to thresholds based on committed energy production.
The biomass-fired power supplier is the Laurentian Energy Authority I LLC. In 1994, the Minnesota Legislature approved a biomass mandate that required Xcel to build or take power from biomass facilities. One source for this mandated power is Laurentian Energy for 35 MW out of facilities using trees and wood waste.
Xcel told the commission in the July 26 application: “Laurentian faces a complicated supply structure and has little ability to control fuel prices. Laurentian has experienced fuel supply and fuel pricing challenges almost since project completion, and specifically since the 2009 PPA amendment was approved. Since that time, biomass fuel prices have increased due to a reduction in the supply of qualifying biomass fuels and increased competition for those fuels. In addition, with increasing fuel costs and fixed energy pricing, Laurentian faced challenges with its business model.”
The proposed PPA amendment addresses these issues. An energy price increase allows Laurentian to recover many of the near-term cost increases it has experienced. The fuel cost recovery clause allows Laurentian to receive reimbursement of future fuel cost increases above the established threshold without the need to seek further energy price increases.
The cities of Hibbing and Virginia, Minn., each own and operate municipal coal-fired stations that have been refurbished to also burn biomass fuels. The plants provide thermal energy for district heating and cooling to businesses and residents of the cities, and related electricity. The Hibbing plant delivers approximately 20 MW of biomass Capacity and Energy to NSP under the PPA, and the Virginia plant delivers approximately 15 MW. The two retrofitted plants began commercial operation in January 2007.