Minnesota regulators are hiring a nuclear expert for their investigation of Xcel Energy Inc.’s massive cost overruns during upgrades to its Monticello nuclear power plant.
The state Public Utilities Commission on Thursday decided that a consulting engineer would help the state Commerce Department review the $665 million spent to extend the plant’s life and boost its output. The final cost was more than double the original estimate.
The PUC in August decided to investigate whether the investment was prudent — and whether ratepayers should pay for the overruns. The Minneapolis-based utility last month submitted to regulators a lengthy explanation, asserting that the five-year project turned out to be more complicated than first envisioned, but still worth doing.
A nuclear expert who reviewed Xcel’s response at the request of the Star Tribune said regulators should consider whether the company had strong managers leading the complex project to replace pumps and other key equipment originally installed during the plant’s construction in the late 1960s.
“These were major construction projects for which Xcel admittedly had little in-house experience,” said David Lochbaum, director of the Union of Concerned Scientists Nuclear Safety Project.
The state’s investigation will be overseen by an administrative law judge who will hold a hearing similar to a trial. The state’s expert has not yet been hired. A Commerce Department official said the posting for the temporary consulting job hasn’t gone up yet.
The construction project, completed in June at Minnesota’s oldest operating nuclear reactor 45 miles northwest of the Twin Cities, allows Xcel to keep the plant running another 20 years and to increase power output by 12 percent.
In a recent regulatory filing, Xcel said that in December 2011 — about two years into the project — the company hired nuclear industry veteran Karen Fili as vice president-nuclear projects to take charge of the Monticello upgrade. Fili implemented “rigorous project management controls” after 2011, but was unable to halt the escalating costs, Xcel Chief Nuclear Officer Timothy O’Connor said in written testimony.
Lochbaum said that suggests Xcel’s management acted too late.
“I don’t think it’s unfair in hindsight to suggest that acquiring experienced, skilled managers up front during the planning and before the implementation phases would have been prudent,” Lochbaum said in an e-mail. “Xcel could have hired a baseball team’s worth of experienced managers circa 2008 and used that skill to avoid far greater cost overruns.”
Xcel denies that it had weak management early in the project. In an e-mail response to the Star Tribune, the company said the work became more challenging as the project evolved. After one phase of work in 2011, the company “analyzed the remaining work ... and determined a change in approach was warranted to most efficiently complete the remaining work while maintaining safe plant operations.”
In August, Fili was named the Monticello plant’s top executive.
The cost-overrun investigation is expected to last into 2014, and is likely to play a role in the PUC’s eventual decision on Xcel rates. The company in October asked for a $291 million rate hike that will raise customers’ bills 4.6 percent increase in January, with a slightly larger increase possible in 2015.
If the PUC declares some of the Monticello costs imprudent, Xcel investors, rather than ratepayers, would pick up the tab.