Xcel’s NSP subsidiary works through nuclear prudence review

Xcel Energy (NYSE: XEL) said July 31 in its second-quarter earnings statement that its Northern States Power-Minnesota subsidiary is looking at a decision in early 2015 on the prudence of at least some of the money spent on its uprate project at the Monticello nuclear plant.

In 2013, the Minnesota Public Utilities Commission (MPUC) initiated an investigation to determine whether the final costs for the Monticello life cycle management (LCM) / extended power uprate (EPU) project were prudent. Project expenditures were about $665m. Total capitalized costs were approximately $748m, which includes allowance for funds used during construction (AFUDC).

Project expenditures were initially estimated at approximately $320m, excluding AFUDC, in 2008 in NSP-Minnesota’s certificate of need and plant life extension filings at the state commission.

In October 2013, NSP-Minnesota filed a report that indicated the increase in costs was primarily attributable to three factors:

  • 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;
  • 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
  • additional Nuclear Regulatory Commission (NRC) licensing related requests over the five-plus year application process.

NSP-Minnesota has said the cost deviation is in line with similar upgrade projects by other utilities and that the project remains economically beneficial to customers. NSP-Minnesota has received all necessary licenses from the NRC for the Monticello EPU, and has begun the process to comply with the license requirements for higher power levels, subject to NRC oversight and review, Xcel noted.

On July 2, the state Department of Commerce (DOC) filed testimony and recommended a disallowance of recovery of about $71.5m of project costs, including expenditures and associated AFUDC, on a Minnesota jurisdictional basis. This equates to a total NSP System amount of approximately $94m.

The DOC’s recommendation indicated that although the combined LCM/EPU project is cost effective, NSP-Minnesota should have done a better job of estimating initial project costs of the investments required to achieve 71 MW of additional capacity (i.e., EPU costs) as opposed to investments required to extend the life of the plant. The department said that about 85% of the total $665m in costs were associated with project components required solely to achieve the EPU.

The DOC’s recommendation, NSP-Minnesota’s response and comments of other parties are expected to be considered by an administrative law judge (ALJ) later this year, who in turn will make recommendations to the MPUC. The results and any recommendations from the conclusion of this prudence proceeding are expected to be considered by the MPUC in NSP-Minnesota’s pending Minnesota 2014 Multi-Year electric rate case.

The next steps in the procedural schedule are expected to be:

  • Rebuttal Testimony — Aug. 26, 2014;
  • Surrebuttal Testimony — Sept. 19, 2014;
  • Hearing — Sept. 25 – Sept. 30, 2014;
  • Reply Brief — Nov. 21, 2014; and
  • ALJ Report — Dec. 31, 2014.

A final MPUC decision is anticipated in the first quarter of 2015.

Xcel filed an update on the Minnesota DOC recommendation with the Public Service Commission of Wisconsin on July 31, saying: “NSP-Minnesota disagrees with the consultant’s findings and will be filing rebuttal testimony contesting those findings and the DOC’s recommended disallowance.” 

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.