Xcel industrial customers ask for rehearing on new capacity decision

The Xcel Large Industrials (XLI) group on Feb. 25 asked the Minnesota Public Utilities Commission to reconsider its Feb. 5 order approving the Northern States Power subsidiary of Xcel Energy (NYSE: XEL) to contract for new solar and gas-fired generating capacity.

This group of industrial power custormers consists of Flint Hills Resources LP, Gerdau Ameristeel US Inc., Unimin Corp. and USG Interiors LLC.

On Feb. 5, the commission issued its order approving Power Purchase Agreements with Calpine (for an expansion of the Mankato gas-fired power plant) and Geronimo Energy (for 100 MW of distributed solar), and Xcel to develop a gas-fired unit at its Black Dog power plant.

Said the industrials in their Feb. 25 request: “The Acquisition Order responds to a nearly two year-old finding that Xcel may have a need for an additional capacity of 150 megawatts (‘MW’) by 2017, increasing up to 500 MW by 2019 (‘Original Need Estimate’). Despite multiple demonstrations that the capacity need on Xcel’s system may be far less than originally anticipated and culminating in Xcel Energy’s conclusion that it would not likely have a capacity deficit until 2024, the Commission selected resources well in excess of the Original Need Order. The Acquisition Order, which approves 631 MW of new generation capacity, will necessarily have a dramatic and unnecessary impact on electric service rates, causing harm to XLI and similarly situated consumers. As such XLI submits this timely petition for reconsideration.

“XLI understands and appreciates that ‘factors affecting need are continually changing, resource decisions must be made in the midst of flux.’ When all of the ‘flux’ introduced over time points in a single direction, however, XLI struggles to understand how the instability could steer a decision in the opposite direction and worries about the potential impact of such a decision on all ratepayers. In addition to simple ratepayer concerns, XLI fears that the Acquisition Order effectively preempts the resource planning process now underway for Xcel Energy. In light of a record which directs a much more modest outcome and the potentially severe burden the Acquisition Order would cause XLI and other consumers to bear, XLI offers this narrow petition for reconsideration of the Commission’s need assessment.

“The 631 MW of capacity the Commission directed Xcel to procure in the near term is not supported by the record in the CAP Docket. Furthermore, it is undisputed that Xcel Energy will be incorporating wind and solar generating resources into its system in the near term and that these resources will have a capacity value. If the Commission elects to err on the side of caution, doing so would lead to decreasing Xcel Energy’s capacity needs, not increasing it. XLI respectfully requests the Commission to reconsider its own Acquisition Order and modify it to come within a zone of reasonableness based on record evidence.”

The projects the commission approved on Feb. 5 are:

  • Geronimo plans to erect photovoltaic panels at about 24 sites adjoining substations along Xcel’s transmission or distribution lines, each site with a capacity of up to 10 MW for an aggregate capacity of up to 100 MW (or 72 MW of accredited capacity);
  • Xcel plans to install a 215-MW combustion turbine generator, powered by natural gas, at Xcel’s existing Black Dog Generating Station in Burnsville (Black Dog Unit 6). This would be a peaker;
  • Calpine plans to install a gas-powered combined cycle plant called the Mankato Energy Center II (MEC II), which will adjoin the existing 375-MW Mankato Energy Center (MEC I). This addition would provide at least 55 MW of peaking capacity plus at least 290 MW of intermediate capacity.

Other parties also filed Feb. 25 requests with the commission in this case:

Northern States Power/Xcel

Xcel on Feb. 25 also filed comments with the commission in this docket, but in this case it is just seeking a relatively simple clarification. “The Feb 5 Order incorrectly describes the Company’s statements accepting the Department’s cost recovery approach for Black Dog Unit 6,” Xcel wrote. “Specifically, the Order describes the Company committing to a different approach to cost recovery for Black Dog Unit 6 than that proposed by the [state Department of Commerce], adopted by the Commission, and accepted by the Company. We discuss the procedural evolution of our Black Dog 6 cost recovery approach in this proceeding, and in support of our request that the Commission clarify this aspect of its Feb 5 Order, we suggest updated wording for the Commission to consider.”

Department of Commerce

The Minnesota Department of Commerce on Feb. 25 asked the commission to clarify or, to the extent it may deem necessary, reconsider its Feb. 5 order. The department is concerned that the order may have deleterious effects on future Request for Proposal (RFP) processes undertaken by Xcel Energy to identify and acquire new resources.

Of specific concern are the following two components of the commission’s determinations regarding PPA between Xcel and Calpine for the Mankato Energy Center II project:

  • Recovery of any net costs for dispatchability payments to Calpine; and
  • Recovery of either any transmission interconnection costs higher than $1.5 million or termination fees.

Invenergy Thermal Development LLC

Invenergy Thermal Development LLC, which offered a rejected PPA bid involving an expansion of its own gas-fired power plant in Minnesota, said in a rehearing request: ” As it stands, the Order contravenes the public interest by: (1) acting on incomplete information regarding interconnection risks associated with one of the selected projects; (2) undermining the competitive bidding process; (3) imposing excessive and unnecessary costs on ratepayers; and (4) failing to accurately reflect the record of this proceeding. If uncorrected, the Order will pass substantial and unnecessary costs on to Xcel ratepayers. Therefore, Invenergy requests oral argument on this Petition and rehearing before the Commission so that the Commission can make a fully informed decision that minimizes ratepayer costs and maintains the integrity of the bidding process.

“The record establishes that the PPA associated with the Invenergy Cannon Falls project (‘Invenergy PPA’): (1) causes the lowest rate impact of the four projects evaluated in this proceeding; (2) places the lowest overall costs on the Xcel system, including environmental costs, under the lower forecast contingencies that are consistent with the more recent Xcel forecasts; (3) did not add new costs or shift risks on to ratepayers when compared to Invenergy’s bid, while other PPAs did so; and (4) is the resource most appropriately sized for Xcel’s need. Presumably for all of those reasons, the Order correctly found that ‘the terms of Invenergy’s proposal are consistent with the public interest and consistent with the prices and terms used to evaluate its bid in this process.’

“Nonetheless, with a capacity need that appears to be well lower than the original 170 to 500 MW assumed to be needed, the Order approves the three most expensive resources for ratepayers, totaling over 650 MW, while not approving the Invenergy PPA. As such, the Order must be reconsidered and reversed.”

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.