Saying it is caught in the middle of diverging energy policies pursued in North Dakota and Minnesota, Aurora Distributed Solar LLC on May 3 petitioned for reconsideration of the Minnesota Public Utilities Commission’s April 13 order denying recovery of North Dakota-related power purchase costs.
The April 13 order denies a petition of Northern States Power d/b/a Xcel Energy for recovery of the North Dakota portion of the costs of a Aurora Distributed Solar power purchase agreement . Aurora requests that the commission grant reconsideration and amend its order to remove the language “with prejudice,” which basically keeps the Xcel petition alive for future consideration.
Aurora’s project involves 100 MW of total solar facilities, with each facility involving distributed generation.
Said Aurora: “As the Commission acknowledged in its Order, the cost recovery issues raised in the Xcel Petition are likely to recur until such time where a comprehensive solution has been adopted to address the diverging state policy goals that exist within Xcel Energy’s multi-jurisdictional service territory. Thus, Aurora requests that the Commission modify the Order to remove the words “with prejudice” so that costs and benefits of the Aurora PPA can be considered as a part of that broader solution.
“Allowing the North Dakota portion of the costs related to the Aurora PPA to be considered again as part of a broader solution is more reasonable and equitable than singling out the Aurora PPA for disparate treatment, particularly where: (1) Minnesota law allows the Commission to revisit prior orders at any time; (2) Xcel Energy executed several other PPAs contemporaneous with the Aurora PPA that were also denied cost recovery in North Dakota but that will be included within a broader cost allocation solution; (3) the Commission acknowledged that it was Xcel Energy, not Aurora, that failed to meet its burden; however, under the Order, it is Aurora, and not Xcel Energy, that faces the consequences of Xcel Energy’s failure; and (4) the Commission stated a desire to preserve the project benefits for ratepayers.”
In September 2015, the North Dakota Public Service Commission (NDPSC) declined to approve an advanced determination of prudence (ADP) to Xcel for the Aurora Project, concluding that it was not a prudent resource addition. The NDPSC stated that Xcel Energy brought forward “the [Aurora] PPA to meet Minnesota requirements and it is not the least-cost project” under North Dakota’s resource planning criteria.
In October 2015, Xcel Energy filed its petition with the Minnesota commission seeking to recover the North Dakota-jurisdictional costs related to the Aurora PPA from Minnesota ratepayers. In its April 13 order, the commission concluded that “Xcel has not met its burden to establish that it is reasonable to recover the Aurora PPA’s North Dakota-related costs from Minnesota ratepayers” and denied Xcel Energy’s request, with prejudice, on that ground.
Aurora wrote in the May 3 filing: “The Commission, Xcel Energy and Aurora all acknowledged at the March 10, 2016 Commission meeting that, to a large extent, Aurora is caught in the middle of a much larger policy debate as to how costs should be allocated among the states in Xcel Energy’s multijurisdictional integrated system. With the exception of its treatment by Xcel Energy and this Commission, however, Aurora is not alone in the middle. Contemporaneous with its selection of the Aurora Project and the initial approval of the Aurora PPA, the Commission also approved a PPA with Mankato Energy Center, LLC, an affiliate of Calpine, for a 345 MW combined cycle natural gas plant (the “Calpine PPA”). The Calpine PPA had similar termination rights as the Aurora PPA, allowing either party to terminate the PPA by April 1, 2016 if 100 percent of the costs of the Calpine PPA were not approved for recovery by Minnesota and/or North Dakota. Accordingly, Xcel Energy also sought cost recovery approval of the Minnesota-portion of the Calpine PPA from this Commission and an ADP from the NDPSC.
“On March 23, 2016, the NDPSC dismissed without prejudice Xcel Energy’s ADP request, relying on the PSC Staff’s assessment that the Calpine PPA was not designed to meet an identified need in the near future. Xcel Energy agreed to a dismissal without prejudice, rather than a denial, because dismissal without prejudice would defer a final decision on the Calpine PPA until the next North Dakota rate case.
“In a letter dated March 29, 2016, Xcel Energy stated that it had waived its right to terminate the Calpine PPA in exchange for Calpine’s approval of the NDPSC’s dismissal without prejudice.
“The Calpine PPA also provided that if the NDPSC denied Xcel Energy’s request for cost recovery, Xcel Energy would be required to file a request with the Commission to recover the North Dakota portion of its costs. Because there has been no final determination on cost recovery in North Dakota, Xcel Energy confirmed that it would not be seeking to recover costs from Minnesota ratepayers at this time. Finally, although Xcel Energy cautioned that the NDPSC’s decision “presents some commercial risk for [Xcel Energy],” it also noted that “[t]he Calpine PPA remains an integral part of our current Resource Plan.”
“To summarize, Calpine was in exactly the same contractual and regulatory position as Aurora. However, Xcel Energy chose to negotiate a waiver of the termination right in exchange for the ability to pursue recovery at a later date with Calpine, and Xcel Energy shoulders the financial consequences of cost recovery denial. In contrast, during its negotiations with Aurora, Xcel Energy did not extend the same terms to Aurora that it offered Calpine. Instead, Xcel Energy offered a waiver of the termination right only if Aurora would agree to shoulder the financial consequences. Xcel Energy’s PPA-negotiation strategies with the winning bidders appear to match the positions that Xcel Energy held with respect to those bidders throughout the competitive resource acquisition docket – Xcel Energy supported selection of the Calpine resource and opposed selection of the Aurora Project.
“In addition to the Aurora and Calpine PPAs, Xcel Energy also negotiated and executed three solar energy PPAs in late 2015 (the “Solar RFP PPAs”). The Solar RFP PPAs were selected under a Track 1 competitive bid process where Xcel Energy was not a bidder and instead selected the resources and brought them to the Commission for approval. Each of these Solar RFP PPAs also had similar termination rights related to regulatory approvals in Minnesota and North Dakota. The Commission approved Xcel Energy’s request for cost recovery of the Minnesota-portion of the Solar RFP PPAs, and the NDPSC denied Xcel Energy’s request for ADPs for all three Solar RFP PPAs.
“Despite the fact that the NDPSC denied Xcel Energy’s ADP requests for the Solar RFP PPAs prior to its denial of the Aurora PPA, Xcel Energy chose not to exercise its termination rights under those contracts. As it did with the Calpine PPA, Xcel Energy has chosen not to seek cost recovery approval of the North Dakota-portion of the Solar RFP PPA costs from Minnesota ratepayers. Accordingly, Xcel Energy is shouldering the financial consequences related to cost recovery of the North Dakota-portion of the Solar RFP PPAs as well.
“Finally, as the Order points out, in its 2016-2030 Resource Plan, Xcel Energy proposes adding over 3,200 MW of large-scale wind and solar projects to its Upper Midwest system, all of which would require the approval of both the Minnesota and the North Dakota Commissions. Accordingly, each of the resources selected to meet these needs, whether selected by the Commission through a Track 2 process or by Xcel Energy through a Track 1 process, will find itself squarely in the middle of this broad policy debate regarding cost allocation within Xcel Energy’s multi-jurisdictional integrated system.
“However, based on the Order, as among all of the known and potential resources caught in the middle of this policy debate, the Aurora Project is the only resource that has been required to bear the associated financial burdens, and only the Aurora Project has been precluded from being a part of any future policy solutions. Aurora respectfully submits that it is unreasonable to treat the Aurora Project differently from similarly-situated resources, and the Order arbitrarily does so without providing any supporting justification.”