Minnesota commission rejects appeals of its decision on new Xcel capacity needs

The Minnesota Public Utilities Commission on April 16 rejected all appeals and motions for reconsideration related to its decision in February to approve power purchase agreements worked out by Northern States Power for new solar and gas capacity, plus the approval of a gas-fired project at the utility’s own Black Dog power plant.

In May 2014, the commission directed Northern States Power d/b/a Xcel Energy to negotiate draft agreements for new power to meet future resource needs. The commission ordered Northern States Power to negotiate finalized terms for four rival proposals:

  • A collection of solar generators to be installed at various locations throughout Minnesota with a combined capacity of 100 MW, proposed by Geronimo Wind Energy LLC d/b/a Geronimo Energy LLC.
  • Mankato Energy Center II, a 345-MW gas-powered addition to the existing Mankato power plant, proposed by Calpine Corp. (NYSE: CPN).
  • Cannon Falls II, a 178.5-MW gas-powered expansion of the Cannon Falls plant, proposed by Invenergy Thermal Development LLC.
  • Black Dog Unit 6, a 215-MW gas-powered generator to be installed in Burnsville, proposed by Xcel.

On Feb. 5 of this year, the commission approved the Power Purchase Agreements with Calpine and Geronimo, and the price terms of the Black Dog Unit 6 project of Xcel. It rejected the Cannon Falls II project. On Feb. 25, the commission received petitions for clarification, reconsideration, or both from the Minnesota Department of Commerce (which participates in cases like this), Invenergy, Xcel, and collectively from a group of Xcel’s large industrial customers. On April 9, the commission met to consider the matter.

Said the final order issued April 16: “The Commission has reviewed the entire record and the arguments of the parties. Based upon this review, the Commission finds that the petitions do not raise new issues, do not point to new and relevant evidence, do not expose errors or ambiguities in the February 5, 2015 order, and do not otherwise persuade the Commission that it should rethink the decisions set forth in that order. The Commission concludes that its decision is consistent with the facts, the law, and the public interest, and will therefore deny the petitions for reconsideration.”

The commission did, however, reconsider one aspect of its order to clarify a pricing term. In summarizing the terms Xcel offered for its Black Dog Unit 6 proposal, the Feb. 5 order states as follows: “Xcel states that it would not seek to recover from ratepayers more than the project’s actual costs, plus financing costs, even if this proves to be less than the amount of Xcel’s bid.” Later in the order the commission “select[ed] the proposal as a resource that fits Xcel’s need and approves the price terms.”

While Xcel initially offered such terms, Xcel revised these terms in its Sept. 23, 2014 compliance filing to conform to the commission’s May 23, 2014, order, which stated, “If a bidder’s actual costs prove to be lower than bid, however, the bidders should retain those savings.” As a result, Xcel’s final bid proposed to recover the full amount of its bid, regardless of how much Xcel might ultimately spend to implement its Black Dog Unit 6 proposal. Regarding finance costs, Xcel proposed to recover only the amount required to finance the actual cost to build Black Dog Unit 6 – but under no circumstances more than the amount to finance its bid costs.

“In selecting and approving Xcel’s Black Dog Unit 6 proposal, the Commission intended to approve the pricing terms set forth in Xcel’s final proposal, which the Department had found to be reasonable,” said the April 16 order. “The Commission hereby clarifies that intention.”

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.