Xcel Energy Inc. said Friday that it has halted work on a project to boost output at its Prairie Island nuclear power plant until regulators review whether it's still worth doing.
The Minneapolis-based utility said that the project, now estimated to cost $310 million, is not as advantageous as once envisioned, in part because the extra power isn't urgently needed in light of forecasts for lower demand growth.
After spending $57 million on engineering work, Xcel said it will stop almost all further outlays so the state Public Utilities Commission can reconsider its 2009 decision declaring the project worthwhile.
"The reason we are asking the question now is that we're at the point that if we were to continue, we would have to ramp up our spending," said Laura McCarten, a vice president for Xcel's Minnesota regional operation.
McCarten said she can't recall another case in which Xcel asked regulators to reconsider an approved generation project.
Judy Poferl, president and CEO for Xcel's Minnesota region, said in a statement that it's "prudent to have this review now rather than after completing the project."
To boost a reactor's output, known as an uprate, utilities make fuel changes that increase the heat and steam output. Such projects require upgrades to pipes, valves, pumps and other components to handle the increased power.
The uprate at Prairie Island, in Red Wing, is now cost-effective for 135 megawatts of added output, or a 12 percent boost, Xcel said in a regulatory filing. The initial proposal was 164 megawatts, or nearly 15 percent.
When the PUC signed off on the need for the Prairie Island power uprate, Xcel asserted that it required the extra electricity to meet future demand. But Xcel now says the projected long-term growth is down 40 percent from that forecast.
Just two years ago, the utility was predicting the need for the equivalent of a new power plant by 2016. But in December, Xcel withdrew plans to switch to natural gas and boost the output of its Black Dog power plant in Burnsville and said no new wind farms are immediately planned after this year.
At Prairie Island, delaying the project until late in the decade poses another issue. Xcel ratepayers would get a much shorter benefit before the twin reactors' licenses expire in the early 2030s -- a point when they might be retired.
Besides the state regulatory delay, Xcel expects that it will take more time to obtain approval for the uprate from the U.S. Nuclear Regulatory Commission, which oversees reactor safety. That could mean the Prairie Island project could be delayed until 2016 or 2017 -- or even longer, Xcel said.
Xcel also told regulators in its filing that boosting nuclear power no longer is as financially attractive compared to generating electricity with natural gas, whose prices are at 10-year lows thanks to the shale-gas revolution.
When it proposed the uprate, the utility had assumed greenhouse gas regulations would be coming -- giving nuclear power an edge over coal-fired generation -- but the utility now says carbon regulation is unlikely until 2020 or later.
Despite those changed circumstances, Xcel said the project still offers a benefit to customers, but nowhere near what the utility originally projected.
Xcel's request to the PUC to reconsider the matter means that groups with an interest in electric issues, such as business customers, critics of nuclear power and state agencies, can weigh in.
The state Commerce Department said it is analyzing this and other generation issues at Xcel. "The issues are complex and we expect to complete our analysis in the next few months," the department said in a statement.
McCarten said she expects the PUC review to take until early 2013.
The company's Monticello nuclear power plant also is planning an uprate, though it has been delayed by technical and regulatory issues. McCarten said Xcel is not asking the PUC to review that project.
David Shaffer 612-673-7090