MN PUC rejects Xcel's Mankato Gas Plant Proposal

 Xcel Energy has come under heavy fire from state regulators at the Department of Commerce as well as the State Attorney General's office for inaccurate, misleading modelling to justify a proposal that would increase greenhouse gas emissions while increasing costs to Minnesota ratepayers.

Xcel Energy had been crafting its 15-year "Integrated Resource Plan" around an assumption that it would acquire the already existing natural gas plant from Southern Company, known as the Mankato Energy Center (MEC). It got to the point where Xcel was working to get its proposal approved by regulators outside of the designated IRP process. Back in May, several large environmental groups made a partial settlement with Xcel to not oppose the MEC acquisition in exchange for closure dates on coal power plants in the IRP (which probably would have been coming anyway). That gave the Xcel's proposal so much momentum that it made it seem inevitable that Xcel would get Minnesota ratepayers to pay $650 million for this purchase of an existing natural gas plant. But then, Xcel Energy's recent proposal came to a hearing on Friday, September 27th at the MN Public Utilities Commission, which has the official role as the guardians of the public interest.  The PUC ultimately decided not to give Xcel Energy permission to charge Minnesotans for an expensive natural gas plant through 2059. The proposal was denied on in a 5-0 vote.

    The plant was slated to operate through 2059 - which is long past the deadlines when we need to have moved beyond natural gas - and where an early shutdown would have posed an extra cost to Minnesota energy users.

At the hearing, a spokesperson from argued why they should be able to use Minnesotans' money to bankroll the highly priced gas plant and risks decades of volatile fuel costs and locking in emissions from fracking plus the debt involved for the next 40 years. 

There was even a competing natural gas power plant operator who identified ways in which Xcel was proposing to pay extra (at Minnesota ratepayers expense) while rejecting a cheaper natural gas resource.

And we had some fun with it during as seen in our video here: https://www.facebook.com/MinneapolisEnergyOptions/videos/715118825632535/    and with the Live Tweets:  https://twitter.com/MplsEnergyOpts 

The Commissioners rejected Xcel's preferred proposal as not in the interest of Xcel customers over its cost, a view shared by Citizens Utility Board (CUB), the Office of the Attorney General and some of Xcel's large industrial customers.    

 

See the story covered by Elizabeth Dunbar at Minnesota Public Radio News here

The Commissioners summary of the Dept' of Commerce's concerns:
So the flaws you see are:
1) Understated capacity - it inflates the value, or rather decreases relative cost of MEC
2) The model prohibits renewable preference or options from being considered
3) Net energy forecast: if you look at any utilities forecast they look like a swinging gate - the rate of growth goes down in the future. And Xcel's forecast fits that through 2030, so that's okay. But then suddenly after that there's energy growth, they've been telling me for a decade it's there but now they're telling me it's going away. Growth goes up 0.5% year after year, that seems significant  (Xcel's explanation is because energy efficiency programs/DSM expire and the graph is trade secret)
Options 2, 23, 25 passed and prevailed:
Option 2. Not approve Xcel’s request to purchase the Mankato Energy Center. (DOC, OAG, Staff,
CUB, City of Minneapolis, ILSR, LSP-Cottage Grove, XLI)
Option 23. Require Xcel to supplement its IRP modeling within 30 days with scenarios that continue
MEC as PPAs.
Option 25. Deny the request to transfer the site permits for the MEC I and MEC II facilities.
SCHUERGER   "The issues of stranded cost is really important. 2054 is a long way out, the world is changing rapidly. Protecting from stranded cost recovery of course.
MEANS - options 2 and 25 - "Xcel has not met its burden. Too many possible risks to customers. Uncertainties are too great. Mitigation measures are inadequate. Large part of the request was based on economic modeling that wasn't supported by Commerce"
SIEBEN: option 2 and 25 "What was particularly concerning in this record, while I appreciate the settlement's magnitude it didn't do an analysis. MEC didn not meet the renewable statue. Xcel's own modling showed that early retirement of MEC would make the purchase an even more costly burden to ratepayers. The record also showed that the purchase was only cost-effetive if it was operated far into the future passed 2050. And that the purchase wasn't needed for early coal retirements, and that it would be a net increase in gas emissions with the purchase. Certainly sympathetic and agree with workers that we need to be mindful that this transition takes care of workers and I think the commission is committed to that, that Just Transition"
TUMA: option 2 and 25 "Challenging docket. Looking for flexibility. I have no problem with Xcel running the power plant, I'm going to assume they'll treat labor well under an NSP affiliate and if they don't let us know. We need something akin to an IRP proceeding, to establish that. Whole different situation from MN Power. Would have liked to approve it I'm open to it, but it doesn't need to come back from. Settlement is a little more than a letter of support, it is a pre-cursor to an IRP discussion. There was very little about MEC. I don't think any of that changes. It's going to be a [super bowl] of an IRP. " -Tuma
LIPSHULTZ: "Don't disagree fundamentally with anything my colleagues said about the record. We need to decide if it is prudent and consistent with the public interest...leads us to a net benefits test. I just want to acknowledge the potential benefits: there's a potential that it would reduce the potential for the Sherco construction, and could facilitate more cost-effective renewables, and that if it's publicly owned it is more likely to be shut down. Socio-economic potnetial benefits include the union jobs piece. But here's the problem, the public interest advocate (Dept of Commerce) told us not to consider Xcel's modeling, so it's hard to count on those unverifed economic benefits. There are primarily economic risks, and potentially environmental risks as the chair mentioned. I would apply Dept's recommended conditions except prohibiting the adjustment. Prohibition on stranded cost recovery, and would add to those condiditon: cap on return on investment 9.3% and only allow recovery after 2026 and only if it is seen later as least cost option. Would Xcel be open to that?  Xcel - "The answer is no we wouldn't accept that"

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