State regulators Thursday unanimously approved a critical element of Xcel Energy’s $650 million purchase of a Mankato power plant after the company restructured the deal so that ratepayers won’t bear any risks.

The Minnesota Public Utilities Commission (PUC) rejected the transaction in September, saying it wasn’t in the interest of Xcel’s ratepayers. With Thursday’s PUC decision, Xcel will buy the gas-fired plant from Southern Power through an unregulated subsidiary, meaning shareholders will shoulder risks and get any benefits — not ratepayers.

“I think the company has met its burden and the record is reasonable and consistent with the public interest,” said PUC Commissioner Valerie Means.

The Mankato Energy Center consists of two gas-fired generators; the first was built in 2006 and the second went online last year. Both generators supply electricity to Xcel under long-term power-purchase agreements, the terms of which will remain the same.

The PUC Thursday approved the purchase agreements between MEC Holdings — the unregulated Xcel subsidiary that will own the Mankato plant — and Xcel’s regulated Minnesota utility. The 760-megawatt gas plant will be the largest in Xcel’s gas-fired fleet.

The leadership and employees of the unregulated subsidiary will be directly employed through MEC Holdings, not by Xcel itself or its regulated subsidiary Northern States Power, the company said in PUC filings.

Minneapolis-based Xcel, the state’s largest electricity provider, announced the deal in late 2018 and contended that it would entail significant savings for ratepayers and boost grid reliability as the company begins closing its coal plants in the 2020s.

But the two Minnesota agencies that represent the public before the PUC — the Department of Commerce and the Minnesota Attorney General’s Office — both disagreed with Xcel and opposed the initial purchase.

Their concerns included that Xcel ratepayers could be on the hook for the plant’s eventual decommissioning costs as well as “stranded” costs in case the plant closed early because of the continuing deployment of renewable energy.

The Commerce Department found that the sale to an unregulated Xcel subsidiary was consistent with the public interest. However, the Attorney General’s Office continued to oppose the deal, arguing that Xcel didn’t put adequate protections in place to ensure the Mankato plant’s independence.

“The utility hasn’t come up with a cradle-to-grave list of [safeguards],” said Max Kieley, an assistant attorney general.

But PUC commissioners said Thursday they were satisfied with the firewalls between Xcel’s regulated operations and the Mankato plant. “I feel like there are appropriate protections in place,” said Commissioner Matt Schuerger.

Independent power operator Calpine built the first Mankato gas generator in 2006; the second was launched under Southern Power’s stewardship. Xcel has respective power-purchase agreements from the generators through 2026 and 2039.

During the duration of those agreements, the Mankato plant will only be producing power for Xcel. Afterward, the Mankato plant could produce power for the wholesale markets, or bid on new long-term supply agreements with Xcel, which would have to be approved by the PUC.