Minnesota PUC to mull issues with Xcel’s power supply contracting

The Minnesota Public Utilities Commission at its Dec. 8 and Dec. 15 meetings will be looking at the complex issue of what to do about the latest resource planning for Northern States Power, a unit of Xcel Energy (NYSE: XEL).

One key question for commissioners is what action to take in regard to the Xcel Resource Need Update and Power Purchase Agreement (PPA) contracts? Should the commission approve or take some other action on the Aurora Solar power purchase agreement? Should the commission approve or take some other action on the thermal power purchase agreement contracts for gas-fired capacity? Should the commission authorize cost recovery for any of the contracts?

Those questions are posed in a Dec. 1 briefing memo filed by commission staff ahead of the Dec. 8 and Dec. 15 meetings.

In a March 2013 order, the commission approved Xcel Energy’s 2011-2025 Integrated Resource Plan, additionally finding the record evidence demonstrated the need for an additional 150 MW by 2017, increasing up to 500 MW by 2019. Since then, Xcel ran a request for proposals process, came up with bids for its own gas-fired capacity, plus gas capacity offers from companies like Calpine (NYSE: CPN), plus a top preferred offer of distributed solar from Geronimo Energy. Xcel has filed draft power purcase agreements for all of this capacity, but also this fall said that its projections for future capacity needs have fallen lately, undercutting the need for much of this new capacity.

Xcel on Sept. 23 requested the commission delay action on all thermal projects and allow Xcel to seek additional flexibility from bidders to reflect in-service timing in the 2019-2021 time period, later than originally anticipated. It also asked that the commission make its Geronimo Energy public interest determination in light of the commission’s assessment of the company’s capacity requirements and the least-cost solar resources available to meet Minnesota’s Solar Energy Standard. Xcel proposed to bring the revised thermal PPAs and its Black Dog 6 new gas capacity pricing terms, along with any new resource need information, back to the commission by May 1, 2015. With regard to solar procurement, Xcel requested the commission consider Geronimo Energy’s proposal alongside bids received in its Solar Energy Standard Request for Proposal Docket.

Said the staff memo about one issue at hand: “Staff does not believe that Xcel’s recommendation is in line with what the Commission ordered. Xcel was required, pursuant to the track two processes and the Commission’s order, to file power purchase agreement(s) for approval. Staff views this lack of request for approval combined with the Need Assessment as potentially a request of reconsideration in the Commission’s finding of need and an attempt to reargue the Commission’s selected proposals. Xcel did, however, file complete PPAs, and the [state Department of Commerce] and other parties have analyzed the merits of the PPAs, so staff believes the record is sufficient for the Commission to make decisions on the merits of the PPAs as was intended by the Commission’s May 23, 2014 Order.

“The primary driver of Xcel’s proposed elimination of need is the MISO coincident peak adjustment. Xcel’s new demand forecast softens Xcel’s need only slightly, and Xcel makes modest adjustments to its existing unit availability. The MISO coincident peak adjustment, however, reduces Xcel’s resource obligation by approximately 500 MW. The Commission already considered the MISO coincident peak issue in its order. All that has changed since then is Xcel’s own confidence in applying a different MISO coincident peak adjustment. Taking the entire record into account, some iterations of forecasts have projected a significant capacity deficit, while more recent forecasts suggest a declining need. Xcel’s September 23, 2014 Needs Assessment represents a new lower bound of possible need.

“Xcel’s next Integrated Resource Plan (IRP) is due January 2, 2015. Staff believes it could be very problematic to assume an upcoming IRP could resolve any lingering uncertainties, due to the impact such a decision could have on the prices of the proposed bids, the ability for Xcel to add the projects to its system, and the urgency this would impose on the next planning process.”

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.