Xcel Energy plans to take over 200-MW wind unit; happy to get nuclear issue resolved

Xcel Energy (NYSE:XEL) Chairman, President and CEO Ben Fowke said April 30 that he is excited at the opportunity to assume control of the 200-MW Courtenay wind power project in North Dakota, and to finally resolve long-running prudency questions about its Monticello nuclear plant in Minnesota.

Fowke made his remarks during a regular quarterly earnings call with financial analysts. The Xcel Energy CEO said the company is in the process of acquiring the wind project in Stutsman County, N.D.

Immediately after the conference call, Xcel Energy issued a news release said it is asking regulators in Minnesota and North Dakota to allow the company to build and own the 200-MW project near Jamestown, N.D.

“The Courtenay project is an important part of our aggressive plans to reduce carbon emissions and double our commitment to renewable energy resources in the most cost effective way possible,” said Chris Clark, president of Northern States Power Co.-Minnesota, an Xcel Energy company.

The project will create an estimated 200 construction jobs and about 10 permanent jobs for operations and maintenance.

Xcel officials indicated that “for various reasons, developers have decided to exit” the wind project. The current developer is Geronimo Energy. Xcel Energy already had a power purchase agreement (PPA) with the project in 2013.

In more recent times, the project’s interconnection request has bogged down and the Midcontinent Independent System Operator (MISO) has said the developer has failed to make necessary payments.

Fowke said Xcel Energy needs regulatory decisions soon to get Courtenay wind farm into construction by late summer. Xcel Energy plans to get Courtenay into operation in October of 2016 and receives production tax credits (PTC) from the operation.

Fowke deemed Courtenay “a great project” and an “indirect” way to hedge natural gas. That’s because the levelized cost is very reasonable when compared to gas, the CEO said.

Xcel named top wind provider by the American Wind Energy Association (AWEA) for several years in a row, Fowke said during the call. The CEO also added that Xcel brought two key transmission line projects into service recently.

Xcel Energy previously announced plans to deliver more than 60% carbon-free energy by 2030.

Xcel Energy gets resolution of Monticello issues

The company has also recently brought some major regulatory proceedings to a close. It has been involved in various regulatory cases in Colorado, Minnesota and South Dakota, officials said.

One long-running case involved a prudence filing for the Monticello nuclear plant, which was resolved in March.

“We continue to believe we acted prudently” at Monticello, but the important thing is that customers will benefit from a diverse portfolio, Fowke said. While Xcel disagrees with some aspects of the ruling, from the Minnesota Public Service Commission, the action but it does resolve some regulatory “overhang,” Fowke said.

The company’s original estimate was $320m and final cost was $665m (total capitalized costs were $748m, which includes allowance for funds used during construction or AFUDC).

The PSC allowed full recovery, including a return, on $415 million of project costs (inclusive of AFUDC). The PSC also allowed recovery of the costs for the remaining $333m of project costs, however with no return on investment.

As a result, Xcel Energy recorded a pre-tax impairment charge of $129m recorded in the first quarter.

Colorado also resolved a multi-year electric rate case in February and South Dakota is implementing revised rates in 2015.

“We had a solid first quarter, with progress on several fronts,” said Fowke. “We achieved regulatory certainty with rate case decisions in Colorado and Minnesota and resolution in connection with the Monticello nuclear facility prudence review.”

Xcel Energy reported 2015 first quarter GAAP earnings of $152m, or 30 cents per share, compared with $261m, or 52 cents per share, in the same period in 2014.

The decrease in ongoing earnings was largely attributable to the negative impact of weather. The extreme cold weather experienced in the first quarter of 2014 positively impacted earnings by approximately 5 cents per share. The weather in 2015 was closer to normal, resulting in a net negative variance when comparing periods.

Other factors include higher depreciation, operating and maintenance expenses, property taxes and lower allowance for funds used during construction. These amounts were partially offset by earnings from higher electric margins due to new rates and riders in various jurisdictions.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.