Xcel making $7.7M in fixes after customers lost heat during polar vortex

Xcel Energy is almost done making $7.7 million in improvements to its natural gas system after an outage in early 2019 that left about 180 of its Minnesota customers without heat as temperatures dropped to 30 degrees below zero.

The Minneapolis-based company also has improved its cold temperature modeling, which state regulators found to be inherently flawed in a post-mortem of how all Minnesota utilities handled the brutal cold snap from Jan. 28 through Feb. 1.

The changes will be reviewed on Thursday by the Minnesota Public Utilities Commission (PUC), which had ordered an inquiry into how utility providers performed during the extreme cold event called a polar vortex.

Xcel had assumed that -25 degrees was the extreme low temperature its gas system would withstand in Princeton and Hugo, the two towns hit by the outage. "Unreasonable" was how the Minnesota Department of Commerce described that assumption.

"The average Minnesotan would not consider -25F or -26F as the lowest possible temperature for those communities," the department said in a regulatory filing.

The state's deep-freeze inquiry also concluded that Minnesota's three largest gas-heating providers were faced with a high number of commercial customers that didn't cut off gas service to conserve fuel — even though they pay a lower rate because they have agreed to use their backup fuel systems in an emergency.

While the icy weather taxed both gas and electricity networks, the gas system had greater problems. The biggest was the outage that caused 152 customers in Princeton to lose service for a day and another 29 in Hugo to lose heat for a shorter time. When gas demand spiked, pipeline pressure dropped and service was shut down.

After the failure, Xcel identified nine separate improvement projects aimed at reinforcing delivery pressures in Princeton, Hugo, Blaine, Becker, Big Lake, Roseville and Chisago Lakes. Altogether, the projects involve installing 13.6 miles of new pipe and other upgrades.

"We're installing larger pipes to help maintain pressures in the areas at the edges of our distribution system to handle the extremely cold temperatures we faced during the polar vortex," Xcel said in a statement. The projects should be completed in the "coming weeks."

Xcel said in a PUC filing it won't seek to recover the $7.7 million in improvement costs from ratepayers.

The Princeton and Hugo areas were connected to Xcel's gas system in 2000 and 1999, respectively. The Commerce Department said Xcel could have known the cold-weather estimates, especially for Princeton, were faulty. Historical weather data for St. Cloud, which is close to Princeton, show temperatures reaching 40 degrees below zero twice in the 1990s and hitting -36 in 2009, the department said.

Xcel said it has now updated extreme-temperature modeling for "all our Upper Midwest system zones." The new minimum temperature in the St. Cloud area is -40 degrees. Hugo is part of the St. Paul zone, which now has a minimum of -32.

"Based on Xcel Gas' clarification of its updated distributed modeling assumptions," commerce said in a PUC filing, the department "is confident that Xcel Gas has corrected the problems that led to the reliability issues."

A continuing problem could be gas customers with "interruptible service," many of whom did not cut usage as required. When the big freeze hit, the inquiry concluded, two-thirds of them did not comply with their contracts, continuing to take gas.

"Staggering" and "systemic problem" were words used by the Minnesota Attorney General's Office to describe that level of noncompliance. "This could cause problems in future severe cold-weather events when the natural gas system is most vulnerable," the office said in a regulatory filing.

Xcel, Minnesota's second-largest natural gas provider, said in a statement that unauthorized gas use by interruptible customers did not contribute to the outages in Princeton and Hugo.

Xcel was the only Minnesota natural gas provider to suffer an outage during last winter's polar vortex. But CenterPoint Energy, Minnesota's largest gas utility with 870,000 customers, Xcel and No. 3 gas provider MERC all had high rates of unauthorized gas use by interruptible customers.

Xcel and CenterPoint said many of those failures stemmed from miscommunication and problems with customers' backup fuel equipment.

But the effect is the same. "When interruptible customers fail to curtail [their gas service], there is a reliability risk because insufficient capacity may be available for firm [full-time] customers," according to a Commerce Department filing.

Utilities commonly fine interruptible gas customers who fail to comply with their contracts, and CenterPoint and Xcel respectively levied combined "curtailment" penalties of $972,724 and $769,491 during the deep freeze.

Curtailment penalties were last overhauled by the PUC after unauthorized gas use became a "significant issue" during the polar vortex-plagued 2013-2014 heating season, according to a Commerce Department filing.

The higher penalties instituted then, however, were "insufficient" to stop violations this time around, commerce wrote.

Mike Hughlett • 612-673-7003