Minnesota PUC to wrestle with issue of excess Monticello uprate costs

The Minnesota Public Utilities Commission on March 3 and March 6 is due to look at the contentious issue of Northern States Power d/b/a Xcel Energy‘s big cost overruns during a life extension upgrade of the Monticello nuclear plant.

In a pre-meeting briefing memo filed on Feb. 26, commission staff said the questions to be looked at are:

  • Was Xcel’s handling of the Monticello Life-Cycle Management/Extended Power Uprate Project (LCM/EPU Project) prudent?
  • Is Xcel’s request for recovery of Monticello LCM/EPU Project cost overruns reasonable?
  • How should costs be allocated between the LCM & EPU parts of the project?
  • What disallowance remedy, if any, should be adopted?

In 2003, after a Minnesota law change, Xcel began the renewal process for its Nuclear Regulatory Commission (NRC) operating license at Monticello. In 2005-06 the company obtained a certificate of need (CN) that allowed it to store spent fuel at the site. During that time, Xcel received the NRC license renewal authorizing it to operate the plant through 2030.

In 2006, Xcel decided to combine its required Life-Cycle Management (LCM) Program with an effort to seek an Extended Power Uprate (EPU) that would increase Monticello’s capacity by 71 MW. In late 2008, the company filed with the NRC a license amendment application requesting approval to operate Monticello with additional capacity and, in January 2009, it obtained a certificate of need for authority to construct the upgrades necessary to achieve the uprate. When requested full recovery of the LCM/EPU Project in its 2012 rate case, the combined project costs had climbed from the original cost estimate of $320 million to almost $600 million.

In September 2013, the commission issued its Findings of Fact, Conclusions, and Order on the 2012 rate case. In that order, the commission determined that only the LCM was in service and that the EPU was not yet used and useful because the additional 71 MW was not operational. At that time, the commission decided to open this docket and directed the Executive Secretary, in consultation with the state Department of Commerce, to develop a proposal for conducting an investigation into whether the company’s handling of the Monticello LCM/EPU project was prudent and whether the company’s request for recovery of Monticello LCM/EPU project cost overruns is reasonable.

In its initial fling in this docket, Xcel acknowledged that the project’s cost climbed from an initial cost estimate of $320 million to $665 million. The company explained that cost overruns were the result of three main drivers:

  • To address long-term plant needs, Xcel expanded the scope of a number of modifications. It explained that, in order to complete the project safely and to assure reliable operations for the extended license period, several components that originally were expected to be repaired or recertified ultimately required replacement. As a result, the initial scope did not capture all the required work needed and; therefore, initial “high level” cost estimates were too low.
  • Installation of the modifications was more difficult and expensive than Xcel foresaw. The company said it found significant difficulties conducting multiple major construction activities at an operating nuclear plant; and that space for installation was extremely tight. These issues made it necessary to remove or work around hundreds of interferences and ultimately slowed productivity.
  • NRC licensing for the EPU proved challenging. The NRC’s review took five years, was beset by major difficulties outside of Xcel’s control (such as the safety issues raised by the Fukushima nuclear disaster in Japan), and cost double what the company originally expected.

Said Xcel Energy (NYSE: XEL) about this uprate project in its Feb. 20 annual Form 10-K report: “NSP-Minnesota has received all federal and state approvals that are necessary and has completed all of the plant modifications to achieve the 71 MW capacity Monticello Nuclear Uprate Project and is in the process of completing the power ascension testing required by the NRC. Operation at the full increased power level is expected in the first half of 2015. As of Dec. 31, 2014, Monticello was operating at 656 MW, which includes approximately 56 MW of the extended uprate capacity.”

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.