Tim Connor, chief nuclear officer, Laura McCarten, a regional vice president, and Dave Sparby, president and CEO of Xcel's Minnesota regional unit, answered questions during an interview at the Xcel building in downtown Minneapolis on Friday.
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FILE - In this April 3, 2006 file photo, Xcel's nuclear power plant at Monticello, Minn., is shown.
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Oct. 19: Xcel defends expensive nuclear upgrade
- Article by: David Shaffer
- Star Tribune
- October 19, 2013 - 11:11 AM
Xcel Energy Inc. on Friday defended massive cost overruns during the five-year upgrade of its nuclear power plant in Monticello, Minn.
The utility completed the $665 million project in July, and admitted that replacing pumps, filters and other equipment cost more than double the original estimate.
Now, in a state filing, Minneapolis-based Xcel said the costs were prudent — something it must prove to Minnesota utility regulators in order to fully recoup the investment by raising electric rates.
“It’s safe, reliable, carbon-free and cost-effective,” Dave Sparby, CEO for Xcel’s Minnesota regional operation, said in an interview Friday.
The construction project at Minnesota’s oldest nuclear power plant employed 3,000 workers at its peak, replacing old equipment to keep the plant running another 20 years, and boosting its power output by 12 percent.
Xcel filed the report in response to the state Public Utilities Commission’s pledge in August to investigate the Monticello investment. The company said that even with the cost overruns, the project benefits customers — saving an estimated $174 million through the remaining 16 years of its license.
Yet that cost-benefit number relies on a “social cost” comparison between keeping the nuclear plant, which emits no greenhouse gases, vs. generating electricity from a plant that does emit them. State law says utility regulators should consider the cost of greenhouse gas emissions, though they’re not currently regulated. Without carbon-emissions savings, the Monticello upgrade would be a losing proposition, costing customers $303 million extra over its life, according to Xcel’s filing.
In interviews, Xcel executives defended the investment, saying they would make the same decision today, even though the utility world has changed since 2008, when the project began. Natural gas, now a favored fuel for power plants, is low-priced thanks to the fracking boom. And electricity demand has lagged since the recession, dampening the need for new plants.
“If we didn’t have our nuclear plants, we would be taking a big step backward in terms of our CO2 accomplishments,” said Laura McCarten, an Xcel regional vice president.
Xcel didn’t estimate the impact of the Monticello upgrade on a typical customer’s bill. But Minnesota customers already are paying for about half of the project’s costs, the company said. Of the remaining cost, 20 percent is assessed in other states’ rates and 30 percent is not yet in customers’ rates, Xcel said.
McCarten said Monticello, and Xcel’s other Minnesota nuclear plant, Prairie Island in Red Wing, supply 30 percent of the power used by the utility’s 1.2 million electric customers in Minnesota. Nuclear is the utility’s second-biggest generating source, behind coal, for Minnesota.
One of the nation’s leading nuclear critics, Vermont Law School Fellow Mark Cooper, said utilities across the nation are turning away from nuclear energy because of the cost, and have announced plans to abandon plants in California, Florida, Wisconsin and Vermont.
“There were other, less costly ways,” he said of Xcel’s decision to boost Monticello’s output by 71 megawatts. “The fact that ratepayers are captive doesn’t mean you get to recover every penny for bad decisions.”
Xcel still hasn’t been granted approval by the U.S. Nuclear Regulatory Commission to crank up the electrical output of the plant, but the utility expects that will happen soon.
As work on the Monticello plant progressed during three scheduled refueling outages since 2008, costs soared above the $320 million estimate.
More equipment needed to be replaced and the work itself, plus the regulatory approval process, turned out to be far more challenging — and costly — than expected, Xcel officials said.
In one unplanned, big-ticket item, Xcel officials decided after launching the project to replace all 14 miles of in-plant, high-voltage wiring that delivers power to equipment. That alone added $98 million in cost, the filing said.
Yet another work-in-progress decision added $61 million in expense to fully replace, rather than just upgrade, a system that filters minerals from reactor water. Issues with feed pumps and motors added another $77 million, the company said.
Xcel said upgrading the plant, where radiation risk is present, turned out to be far more complicated than building from scratch. Workers had to cram themselves into tight spaces to replace equipment originally installed before the plant’s concrete walls went up. In some cases, workers had to use a mirror to make welds they couldn’t see directly.
“In a new plant, you can wear your normal clothes,” Xcel’s chief nuclear officer, Timothy O’Connor, said in an interview. “In a plant that has been operating you have to wear protective clothing and deal with radiological conditions.”
O’Connor said no workers received excessive doses of radiation, however.
State regulators will take months to pore over the Monticello report, and business, government and consumer interests likely will weigh in. Xcel investors have a big stake, because the company is entitled to a return on prudent investments.
The PUC’s investigation will take place at the same time that Xcel is preparing to again ask to raise Minnesota electric rates. Xcel executives declined to talk about it in detail except to say the remaining Monticello costs will be included.
David Shaffer • 612-673-7090 Twitter: @ShafferStrib
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