Why Won’t Xcel Come Clean on Cost of “Clean” Energy?
The Minnesota Wild just began their new season at the Xcel Energy Center with a couple wins and, as a lead sponsor of the hockey team and arena, viewers of the games were treated to Xcel’s new ad campaign. One commercial features a gentleman cheerfully delivering “clean renewable energy” to homes in the form of a red box placed at the front door. In the ad, Xcel cannot help but brag about being the nation’s number one provider of wind energy.
Xcel is indeed big on wind and they are going even bigger. The Minnesota Public Utilities Commission (MNPUC) just approved their 15-year integrated resource plan (IRP), which will add at least another 1,000 MW of wind by 2019. At the same time, Xcel gained approval to shut down two coal-fired generating plants in Becker, Minnesota by 2026.
The plan is consistent with Xcel’s announcement last month that it will add eight to ten new wind farms that will increase their wind production by 1,500 megawatts, or 60 percent.
Of course, Xcel never lets on in their ads or their press releases that all this wind comes at a price and poses serious risks to its customers.
In fact, the company won’t even go on the record with the MNPUC as to whether their renewable energy strategy is truly the best option for their customers. In their briefing on Xcel’s IRP, MNPUC staff state:
In Xcel’s compliance filing explaining its [Resource Treatment Framework], the Company refers to allocating costs based on a “least cost proxy” or “cost causation” methods. It would be ideal, for the purposes of this proceeding, if Xcel could go on the record to confirm that its renewable investment strategy is, as it claims, least-cost and in the public interest for all states in which it serves.
The Resource Treatment Framework (RTF) cited above by staff is Xcel’s strategy to address jurisdictional cost allocation disputes among the states served by the company’s system. The MNPUC required Xcel to develop the RTF after recent pushback from the North Dakota Public Service Commission (NDPCS) against Xcel’s efforts to allocate the cost of their renewable strategy across their entire system, which includes parts of Minnesota, South Dakota, North Dakota, Wisconsin and Michigan.
North Dakota began pushing back against Xcel’s renewable energy strategy a few years ago. And in 2015, the NDPCS denied Xcel’s efforts to recover costs for its Aurora solar project from North Dakota ratepayers, calling the project imprudent.
This was a landmark decision. As NDPSC Commissioner Brian Kalk explained, “Today’s decision to deny Xcel Energy’s advance determination of prudence marks a first for the NDPSC. I want to send a strong message to Xcel that in North Dakota we remain committed to the bedrock ratemaking principles of need and least cost planning.”
NDPSC Commissioner Randy Christmann went further, saying, “We need to do all we can to make sure that the state of Minnesota’s scheme to mandate very high-cost electricity is not paid for by North Dakotans who happen to receive service from Minnesota-based utilities.”
So currently, the NDPSC isn’t buying Xcel’s claim that their renewable investment strategy is “cost-effective” and even the staff of the MNPUC complain that Xcel won’t go on the record.
Adding 1,500 megawatts of wind and shutting down two coal plants could result in substantial rate increases for Xcel’s customers.
One thing stands out from the MNPUC briefing paper: Xcel has not adequately assessed the full impact of adding that much wind. At times when electricity demand is low and the wind is blowing too much, the system needs to “curtail” wind to maintain balance. Shutting down wind farms in these circumstances is very costly and adding more wind increases the risk of curtailment. Despite this risk, Xcel’s plan provides no detailed analysis on the possible rate impact.
Staff make one point that might give Xcel pause as it considers whether to bet so much on wind. Because the company’s wind proposal predated the MNPUC’s approval of the resource plan, “Xcel is clearly the ‘cost-causer’ in this case.” While Minnesota rate payers will need to pay their share of the cost, Xcel shareholders may very well get stuck with costs allocated to other states as just happened with the Aurora solar project.
With their shareholders now exposed to this risk, maybe Xcel will get more serious about measuring the true cost of their renewable energy strategy.