Xcel's power pullback

Article by: DAVID SHAFFER , Star Tribune
Updated: December 1, 2011 - 9:09 PM

The utility shifted course after seeing easing demand for electricity, but it will still spend on environmental upgrades.

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At Xcel’s Black Dog plant in Burnsville, a plan to convert two coal-fired units to natural gas is on hold. Instead, they’ll shut down in 2014.

Photo: Jim Gehrz, Star Tribune

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Xcel Energy Inc. said Thursday that it won't need as much electricity in the near future, and the utility will put off generation-boosting upgrades to coal-fired and nuclear power plants in Minnesota.

Yet even as the Minneapolis-based utility revised its energy forecast, it said it plans to spend $438 million on environmental upgrades at its Minnesota plants over the next nine years, mostly at its largest generator, the three-unit, coal-fired Sherco power plant near Becker, Minn.

"We are seeing a continuing economic downturn and that affects electricity demand," Laura McCarten, Xcel regional vice president, said in an interview. "It doesn't make sense to build something before it's needed."

Xcel, which has the most wind power generation of any U.S. utility, also said it may stop investing in wind farms after 2012 if a federal tax credit expires and makes new wind projects uneconomical. The utility said it remains on target to meet the state's green energy mandate, and should get 26 percent of its power from renewable sources by 2020.

The company, which serves 1.1 million customers in Minnesota, outlined environmental, transmission line and other planned investments at a New York investor conference and in a separate regulatory filing in Minnesota.

Xcel also disclosed that a Nov. 19 fire at one of the three Sherco units will take it out of service for six months or longer. The cost is yet to be determined but likely to be covered by warranty and insurance.

Kent Larson, senior vice president for operations, said the accident occurred during testing of a boiler upgrade and damaged the generator and turbine.

The outage also affects the Southern Minnesota Municipal Power Agency, which owns 41 percent of that unit and relies on it to supply 18 member municipalities. Dan Hayes, director of public affairs for the agency, said it is assessing the cost implications.

Just last year, Xcel told Minnesota regulators that it would need the equivalent of a new power plant by 2016. It planned to switch to natural gas and boost the output of two coal-fired units of the Black Dog power plant in Burnsville. It also sought regulatory approval to boost the Prairie Island nuclear power plant's output by 12 percent.

On Thursday, Xcel said it now sees no need for additional generation until 2018 in its Minnesota region, which also includes parts of North Dakota and South Dakota. Both the Black Dog and Prairie Island projects have been put on hold and will be reviewed further, the company said.

McCarten said Xcel will stop generating at the two Black Dog coal units in 2014 to avoid an expected deadline for mercury emission controls on such plants.

It is not the first Minnesota utility faced with dramatic changes in electricity demand. Great River Energy, the Maple Grove-based wholesale power cooperative that serves 650,000 rural and suburban customers, recently decided to mothball until 2013 a brand-new power plant whose output isn't needed.

Xcel executives said at the investor conference that the utility still plans to invest $13.4 billion on transmission, generation and other needs through 2016 across its eight-state operating region. Its Minnesota environmental investments over the next nine years would be dominated by $365 million in upgrades at the three Sherco coal generators, mostly after 2017.

CEO Ben Fowke said Xcel's environmental policies have been "very proactive" in reducing carbon dioxide, sulfur dioxide and nitrogen oxide emissions, in part by the $1 billion conversion to natural gas of two coal-fired power plants in Minneapolis and St. Paul.

"As a result of those efforts you see us having a more balanced fuel mix," Fowke said. "We are still going to have coal, but we are going to also have gas; we're going to have nuclear. We are going to have a healthy blend of all the various energy types and not lean on any one resource."

Beth Goodpaster, an environmental attorney who has intervened in Xcel regulatory cases, said that despite the bad economy, it's not a time for the utility to back off on its push toward renewable energy.

"We need to evaluate our options and carefully choose the cleanest, most sustainable options for the long term," she said.

David Shaffer • 612-673-7090

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