Xcel backs off Prairie Island power boost

Xcel Energy no longer believes spending $237 million to boost power at its Prairie Island nuclear plant near Red Wing, Minn., is a good deal for customers.

The utility told state regulators that bigger fuel rods added to the twin reactors in expectation of increasing their output offer an unexpected savings -- in the form of longer times between refueling. And that could benefit ratepayers almost as much as the power upgrade.

"At this point, we believe it is reasonable to conclude that further investment in the project will not benefit our customers," the Minneapolis-based utility said in a filing Monday with the Minnesota Public Utilities Commission.

Xcel, the state's largest electric utility with 1.1 million Minnesota customers, asked regulators for a two-month period to allow the state Commerce Department and others who watch utility matters to weigh in on the news. Xcel acknowledged that regulators, after hearing from other interests, could still decide the project is warranted. Xcel said it is willing to go ahead with the project should that happen.

State regulators approved Xcel's business case for the power upgrade in 2009. Such upgrades have been common in the nuclear power industry, allowing a quarter of the nation's reactors to increase output by 7 to 20 percent.

At first, Xcel hoped to generate nearly 15 percent more power by investing in new turbines and generating equipment.

But Xcel began to question the project's economics in March, and stopped spending money on it until regulators could review whether it was still a prudent investment. Xcel said it still seemed like a good deal, though it would produce less extra power than first believed -- about 12 percent more.

Meanwhile, Xcel said, the economic benefits of the power-boosting upgrade have dwindled, and could get worse if there are delays in obtaining safety-related approval from the U.S. Nuclear Regulatory Commission.

"When circumstances change significantly after the initial regulatory approval, as with this project, our approach is to take a step back and take another look before continuing," the company said in a statement Tuesday.

With slack electricity demand, Xcel has expressed no worries about meeting customers' current power demands if it drops the upgrade project. The utility said future power needs can be met with new generation, likely from natural gas, already under consideration in light of its decision to retire the remaining two coal-fired units at the Black Dog power plant in Burnsville.

The company still is moving ahead with a plan to increase the output of its Monticello, Minn., nuclear reactor. That project remains under NRC safety review.

By coincidence on Tuesday, Prairie Island's Unit 1 was shut down for refueling just after midnight. During the outage, about 600 contractors will join plant workers to replace one-third of the reactor's fuel and do other maintenance, Xcel said.