Northern States Power-Minnesota (NSPM), a unit of Xcel Energy (NYSE: XEL), on Nov. 2 filed for a rate hike at the Minnesota Public Utilities Commission, with some of that extra money going to various power plant repair and upgrade projects.
Steven H. Mills, the Vice President of Energy Supply Operations for Xcel Energy Services (XES), supplied supporting testimony outlining the various projects in the works for the 2015-2018 period.
He said that Energy Supply anticipates some major investments in Renewable and New Generation. Specifically, the commission recently approved development and construction of the Courtenay Wind Farm, which will be placed in service in 2016. In 2018, Xcel anticipates building a new gas-fired combustion turbine at the Black Dog plant (Unit 6). The last coal-fired unit at Black Dog was retired recently, leaving gas-fired generation at the site.
In light of the impacts of the company’s recent past investments (for example, the 2015 addition of the Pleasant Valley and Border Winds projects to the system) and pending future investments, NSPM has deferred some fundamental Reliability/Performance Enhancement spending from 2016 and 2017 into 2018 and beyond. “While we cannot defer needed projects indefinitely – and some needs cannot be deferred at all – we have taken these steps to balance customer cost impacts with needed work at our plants,” Mills wrote. “As a result, over the next three years we anticipate lower capital outlays in 2017, balanced by an increase in capital additions in 2018 in order to meet customer needs for reliable, safe, and cost-effective service.”
NSPM plans to place into service capital additions at existing plants totaling approximately $37.2 ($28.3) million in 2016. In addition, it has budgeted in 2015 and 2016 capital expenditures of approximately $300.0 ($220.4) million, plus AFUDC for a total of $312.4 ($229.5) million of capital additions in 2016 for the completion of the Courtenay Wind Farm. Total capital additions for 2016 are expected to total $350.9 ($257.8) million.
While the Courtenay Wind Farm is a major capital project for Energy Supply, the utility is currently recovering the costs of this new facility (capital and O&M) through the Renewable Energy Standard (RES) rider during the pendency of this rate case. Consequently, the Courtenay Wind Farm is not included in Energy Supply’s or the company’s capital additions in this case.
In 2016, NSPM plans to place in service capital projects at the Black Dog, Riverside Unit 9, Sherburne County (Sherco), and A. S. King Unit 1 plants as part of an ongoing commitment to maintain reliability and performance.
In 2017, NSPM plans to place into service capital additions at its plants of approximately $53.4 ($39.2) million. The vast majority of these additions, $50.0 ($36.7) million, are Reliability/Performance Enhancement investments, which are needed to maintain the generation fleet in good working order. Significant individual efforts include projects at Sherco Unit 3, A. S. King Unit 1, Black Dog Unit 5/2, and Wilmarth Unit 2.
In 2018, the company plans to place into service capital additions at its plants of approximately $237.8 ($169.2) million. The new generation Black Dog Unit 6 project is the largest portion at $108.3 ($79.6) million. In addition, Reliability/Performance Enhancement projects that were deferred from 2016-17, due to budget constraints, are a significant driver at $103.7 ($76.2) million.
New renewable energy projects have changed the utility’s generating mix
The NSPM generation portfolio has evolved as a result of state and federal energy policies and regulations and company-driven efforts to improve efficiencies and environmental performance, Mills noted. For example, to comply with Minnesota’s Renewable Energy Standard (RES), it has added over 1,200 MW of renewable energy to the NSP System from 2006-14, including wind, hydro, biomass, and solar resources. In 2015, it placed in service 350 MW of additional wind capacity through its Pleasant Valley wind farm (200 MW) and Borders Winds farm (150 MW). It recently received approval to develop an additional 200 MW of low-cost wind capacity through its Courtenay Wind Farm, which is scheduled to be placed in service in 2016.
As the company continues to complete new renewable generation projects, it reduces the capacity factor of existing fossil generating units so that renewable energy displaces the use of fossil fuels on an operational basis, Mills pointed out.
In 2015, NSPM is forecasting Reliability/Performance Enhancement and Environmental Improvement capital additions of $88.6 ($65.1) million. These include a series of Reliability/Performance Enhancement projects completed during the planned Sherco Unit 1 overhaul. These projects are:
- replacement of the turbine Electro-Hydraulic Control (EHC) system,
- replacement of the plant Distributed Control System (DCS) system, and
- replacement of the boiler coutant bottom.
It has also undertaken Environmental Improvement projects for Sherco Units 1 and 2 NOx control coal mill optimization to comply with a Minnesota Pollution Control Agency (MPCA) Site Implementation Plan (SIP) consent order.
For the next two years (2016-2017), capital spend will decrease with respect to base investments. The reduction in base capital was made to somewhat offset additional costs related to major capital Renewable and New Generation additions that are being placed in service in 2015 and 2016. When major capital additions are planned, non-essential capital additions are deferred where possible to minimize the effect on customers while maintaining an acceptable risk profile.
In addition, base environmental enhancement costs are currently forecast to decline from the previous three years due to the completion of upgrades to the Sherco Units 1 and 2 Air Quality Control Systems (AQCS), including installation of a mercury reduction system. Sherco is a three-unit, 2,222-MW, coal-fired plant. Unit 3 is newer than the other two units, so it is not treated the same way in terms of maintenance and environmental compliance needs.
Some near-term capital projects have been pushed back
When the Courtenay Wind Farm project was approved in 2015, efforts were made to delay or cancel non-essential capital projects that were budgeted in 2016-17. Approximately $50 million of projects were moved out of each year. A similar effort was completed with O&M costs.
The 2018 planned Reliability/Performance Enhancement budget reflects efforts to plan for projects that need to be completed in 2018, as well as projects that could have been completed earlier but were deferred. Examples of base capital projects that it would typically have completed earlier, but which were deferred until 2018 or later, include A.S. King A&B Feedwater Heater replacement and Sherco Unit 1&2 Coal Crushers and Feeder replacements.
In 2016, NSPM anticipates placing the Courtenay Wind Farm in service (approximately $312.4 million with AFUDC); and in 2018 it anticipates placing the new Black Dog Unit 6 in service (approximately $108.3 million with AFUDC). The company does not anticipate any major capital additions in 2017.
The company plans approximately $9.2 ($6.7) million in plant additions in 2016 for projects at Sherco Units 1, 2 and 3 to coincide with the planned overhaul at Unit 2 in 2016. These projects primarily relate to maintaining environmental compliance, reliability and efficiency of these units. NSPM is planning one significant capital project addition at Sherco for 2016. It has budgeted $3.4 ($2.5) million to replace the Sherco Unit 2 turbine Electro-Hydraulic Controls (EHC) system. The EHC system controls the amount of steam entering the turbine, thereby regulating the output of the unit. For this project, it is replacing the current EHC system with a new digital turbine control system. It will also replace the current mechanical overspeed trip systems with a triple redundant electronic overspeed trip system, and replace critical aging field devices and cables with new equipment.
Mills was asked why these Sherco Units 1 and 2 investments are being made while the future of these units is a question. Xcel recently told the commission it would be willing to retire these two units early to mid next decade, in large part due to the EPA’s new Clean Power Plan for CO2 reduction. “These investments are needed to preserve the reliable operation of these units in the near term, independent of a decision on their future operation,” Mills responded. “Thus, it is important that these units are well-maintained until such time as they are removed from service.”
NSPM is planning total capital plant additions of approximately $14.8 ($10.9) in 2016. In 2016, there is a scheduled major overhaul for the A. S. King Plant, a 511-MW, single-unit, coal-fired facility. There are four significant capital projects planned for the A.S. King plant in 2016:
- Replace Cyclone Burner Secondary Air Dampers
- Replace AQCS Baghouse Filter Bags
- Replace Furnace Wall Refractory
- Replace Tubular Air Heater Cold Side
NSPM has budgeted $3.6 ($2.7) million in 2016 capital additions to replace six of the twelve secondary A. S. King Unit 1 Cyclone Burner Secondary Air Flow Dampers, drives, actuators, and airflow measurement devices. This project will improve cyclone air flow control and reduce maintenance issues with the drives and linkages, thereby increasing performance and reducing the potential for outages for maintenance of the cyclones.
Additionally, the cyclone work is necessary to comply with Maximum Achievable Control Technology (MACT) rules, which require tight combustion control that is achieved through robust dampers. A cross-functional reliability team performed industry benchmarking and visited several plants of similar design as the basis for initiating this project. The new drives being installed as part of this project will reduce boiler backend fouling and extend unit run time through reliable control of combustion air inputs.