Xcel files plan to excise North Dakota from multi-state decisions

Northern States Power-Minnesota (NSPM), which is part of Xcel Energy (NYSE: XEL), on Jan. 3 filed with the Minnesota Public Utilities Commission a proposed Resource Treatment Framework (RTF) that would effectively carve North Dakota out of future power plant capacity additions in a five-state service area for the Northern States Power companies.

This proposed RTF is being filed simultaneously with the North Dakota Public Service Commission (NDPSC) and the Minnesota PUC and is based on conversations with staff at both commissions. Said the filing about those conversations: “Through this work, we see a path that no longer selects future resources on the basis of a wholly integrated NSP System; rather, we recommend a framework that would allow Minnesota and North Dakota to gradually become more independent of one another with respect to future resource selection. We believe this will provide each state with greater flexibility and customization around energy resource planning and selection.

“With this Application, the Company asks each Commission to engage in a dialogue with the goal of achieving consensus on the future structure of the NSP System. To be clear, we are not seeking orders that will allow us to finalize an end state through this Application. Rather, we seek consensus on (a) the structure the NSP System will take over the long term; and (b) each state’s responsibility for the Legacy System in which it has participated for generations.

“We believe addressing past generation resource selections that were supported in Minnesota and questioned in North Dakota (Disputed Resources) is integral to resolving the latter issue. To facilitate moving ahead, we present feasible future system structures consistent with our recommendation (including Pseudo Separation and Legal Separation), and proposals for addressing the Disputed Resources. We also provide supporting information regarding these different structures from a qualitative/feasibility perspective; resource planning analyses; and outlines of potential revenue requirement impacts to facilitate discussion and achieve consensus on the appropriate path forward.”

Northern States Power, along with the five states it serves in the upper Midwest, have long benefitted from operating an integrated system, the company noted. Three principles have been the foundation to achieving alignment amongst all participants:

  • Retain the integrated nature of the NSP System to capture the benefits of scale and diversity for all customers;
  • Respect the sovereign nature of each of the states served, while ensuring that they understand and bear the costs and risks associated with their decisions; and
  • Ensure the company has an opportunity to fully recover its cost of service in each state served by the NSP System.

The Xcel subsidiary noted that the NSP System is changing, apart from any new decisions that may be made in the future. It anticipates unavoidable expirations of several key power purchase agreements (PPAs) and the planned retirement of key baseload generation such as the coal-fired Sherburne County (Sherco) Units 1 and 2 in Minnesota. At the same time, it does not anticipate significant additional capacity needs until the mid-2020s. This timing provides a window in approximately the 2020 timeframe to resolve past issues and also achieve a form of separation that permits more independent future energy choices in the NSP System.

To that end, NSP proposes the following Resource Treatment Framework:

  • All currently anticipated and past resource selection and other disagreements will be permanently addressed and the Legacy System established.
  • All NSPM states will continue to be served by the Legacy System and all customers will enjoy the benefits and bear the burdens of the Legacy System.
  • With respect to future new resource additions, the company will be able to assess and propose resources for North Dakota and the remainder of the NSP System separately. When a resource need arises in North Dakota, that need will be met by a resource sized for, dedicated to serve only, and fully recovered in North Dakota. When a resource need arises in, or new resources are otherwise planned for, the remainder of the NSP System, those resources will be sized for, dedicated to serve only, and fully recovered in the remainder of the NSP System. Xcel Energy may propose particular future resources to be utilized concurrently by North Dakota and the remainder of the NSP System should circumstances warrant, and will propose cost-sharing arrangements at that time.
  • Over time, the generation portfolio serving North Dakota and the remainder of the NSP System will materially separate as units of the NSP System retire or expire.
  • South Dakota may elect to join North Dakota under this framework or remain part of the NSP System consistent with its own priorities.

It would be correct to say that some of the recent disagreements between the MPUC and NDPSC are driven by renewable energy or other clear legislative mandates such as Minnesota’s Renewable Energy Standard (RES) or the Minnesota Metro Emissions Reduction Program (MERP), said the utility. Others, however, are driven by more fundamental differences between the needs and wants of various customers. These differences include not only the mid-1990s passage of externality laws in Minnesota and the concomitant passage of anti-externality laws in North Dakota, but also the perception of how to meet load-serving needs and incorporate the availability of competitive markets for energy, ancillary services, and capacity to provide our customers with the power they need.

Further, regulators in North Dakota have both formally and informally called into question material Northern States Power investments or initiatives – even those that had been previously recovered, in part, from North Dakota customers. These included concerns over:

  • the company’s Demand Side Management (DSM) programs;
  • Legislative requirements in Minnesota to add wind and biomass resources in order to continue to operate its nuclear facilities, and the establishment of a Renewable Development Fund (RDF);
  • Company investments in its High Bridge plant;
  • Cost recovery of existing resources such as community-based economic development (CBED), small solar, and biomass PPAs;
  • Company investments in wind facilities such as Grand Meadow, Prairie Rose, Odell, and Pleasant Valley; and
  • Company costs related to the 187 MW solar portfolio (now resized as a 162 MW portfolio) and the 100 MW Aurora Solar PPA.

The utility added: “We note also that some misalignment between Minnesota and North Dakota is a result of resource selection by the MPUC that was not necessarily supported by the Company but for which it was necessary for us to seek approval in North Dakota. For example, the Company advocated against selection of the Aurora Solar project in the Minnesota Certificate of Need proceeding but the project was nonetheless selected. Thereafter, the Company defended the project before the NDPSC notwithstanding our reservations, but the NDPSC has not approved the project. In this instance, the Company was nonetheless able to resolve its inability to recover the North Dakota share of that project through commercial arrangements. However, without a robust RTF, the Company will be left with few tools but to cancel these types of projects in the future.”

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.