Xcel likely to get ‘contested’ review of Monticello nuclear costs

The Minnesota Public Utilities Commission is scheduled to review at its Nov. 14 meeting the issue of cost recovery for Xcel Energy (NYSE: XEL) on the extra money spent on an uprate project for the Monticello nuclear plant.

In 2005-2006, Xcel obtained a certificate of need from the commission to store spent nuclear fuel on site at the Monticello plant. Xcel also received a renewal of its operating license from the Nuclear Regulatory Commission (NRC) that allows Xcel to operate the Monticello plant through 2030.

Shortly after that, Xcel combined its Life Cycle Management (LCM) program with an effort to get permission from the NRC for an additional 71 MW of capacity to the Monticello plant through the Extended Power Uprate (EPU) process. In 2009, Xcel was granted a certificate of need by the Minnesota commission which authorized it to make the necessary upgrades and install the necessary equipment to implement the 71 MW uprate.

In the certificate of need proceeding, Xcel, which operates in the state as Northern States Power-Minnesota, projected the cost of the LCM/EPU project would be about $320m. As of August 2013, the cost of this project had increased to at least $665m, said a Nov. 6 briefing memo from commission staff.

Most of this increase in the cost was incorporated into Xcel’s base rates in Xcel’s last two rate cases. In both cases, Xcel committed to a comprehensive prudence review of all costs associated with this project and “agreed to waive any defense [it] may have that the outcome of this investigation could be limited by the prohibition against retroactive ratemaking.” Xcel has indicated that additional costs associated with concluding this project would be requested in its 2013 rate case and multiyear rate plan filing.

Xcel included in an Oct. 18 filing a summary, a prudence report, and testimony from four witnesses. In the prudence report, Xcel described the experience of other utilities with nuclear plants that have been involved in similar uprate projects. Xcel also explained that it believes the Monticello project was handled in a prudent manner, remains cost effective and the cost overruns were reasonable. Xcel provided explanations for the cause of each of the major cost overruns.

Staff recommended to the commission in the Nov. 6 memo: “Staff believes the most administratively workable path for this investigation to follow would be a contested case proceeding. Putting this case on its own independent track will help to better manage this investigation during the pending Xcel rate case, in docket 13-868, which was filed on November 4. A contested case proceeding would also ensure that this investigation and the use of the outside independent consultant follows an open and transparent process.”

Staff added: “Staff recognizes that Xcel is the only party that has submitted a filing in this docket to date and none of the potential parties (including Xcel) have been asked to file or have filed procedural comments. Nevertheless, after consulting with Xcel and the [state Department of Commerce], staff does not believe there is any disagreement amongst the parties and potential intervenors that this matter should be referred to the Office of Administrative Hearings for a contested case proceeding. Because the scope and cost of the Monticello project has been an issue in previous Xcel rate cases and the Commission opened an investigation into this matter at the end of the 2012 rate case, staff believes this matter should be referred to the OAH for a contested case as soon as possible.”

Staff’s recommended schedule for this contested case runs almost to the end of 2014.

Said Xcel’s Oct. 25 Form 10-Q report about this matter: “In the NSP-Minnesota 2013 Minnesota electric rate case final order, the MPUC initiated an investigation to determine whether the costs in excess of those included in the Certificate of Need (CON) for NSP-Minnesota’s Monticello life cycle management (LCM)/extended power uprate (EPU) project were prudently incurred. In October 2013, NSP-Minnesota filed a summary report and witness testimony to further support the change in and prudence of the incurred costs. The filing indicated the increase in costs was primarily attributable to three factors: (1) the original estimate was based on a high level conceptual design and the project scope increased as the actual conditions of the plant were incorporated into the design; (2) implementation difficulties, including the amount of work that occurred in confined and radioactive or electrically sensitive spaces and NSP-Minnesota’s and its vendors’ ability to attract and retain experienced workers; and (3) additional Nuclear Regulatory Commission (NRC) licensing related requests over the five-plus year application process. In September 2013, the Advisory Committee to the NRC on Reactor Safety recommended approval of the EPU license. The EPU license is expected to be granted by the end of 2013 and the complementary MELLA Plus fuel license is anticipated to be received in March 2014. NSP-Minnesota has provided information that the cost deviation is in line with similar upgrade projects undertaken and the project remains economically beneficial to customers. The results and any recommendations from the conclusion of this prudence proceeding are expected to be considered by the MPUC in NSP-Minnesota’s 2014 Minnesota electric rate case.”

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.