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Xcel’s proposal to buy gas power plant in Mankato should be denied

Since the beginning of this year, CUB has been monitoring the proposal by Xcel Energy to purchase a 720-megawatt gas power plant in Mankato: the Mankato Energy Center (MEC). For over seven months, parties like CUB, the Department of Commerce, the Office of the Attorney General, the City of Minneapolis, the Institute for Local Self-Reliance, and large industries in Xcel’s service area have raised concerns over the proposed acquisition. For most parties, the costs are too high, the environment too fluid, and Xcel’s proposal too unclear to fall on the side of the purchase being in the public interest.

The Mankato Energy Center is operating today, owned by the Southern Company, and it sells power to Xcel under contract. Now, Xcel would like to purchase and own the plant itself. The question at issue whether it’s in the public interest for Xcel to buy the plant – at a price of $650 million, up nearly 60% from the $407 million it sold for in 2016 – and to own it, rather than simply continue to buy its electricity.

On July 26th, CUB and other parties submitted a final round of formal comments to the Public Utilities Commission (PUC) on this issue.

CUB has been deeply concerned that making this decision outside the integrated resource planning process would compromise built-in consumer protections and may ultimately end up costing consumers a great deal of money. Many of the parties submitting comments last week agree.

In an integrated resource plan, utilities must – by Minnesota law – propose how they will meet customers’ energy needs for the next 15 years.  It is a comprehensive look at all of the options, including energy efficiency, power plants, renewable energy, and more.  It allows the PUC and groups like CUB to see the full picture of what energy might be needed, and how different energy resources can be put together in the cleanest, least expensive way.  Xcel has an integrated resource plan underway right now, and the question of whether to purchase MEC should be a part of that comprehensive consideration.

Parties have raised a number of other issues with Xcel’s proposed purchase of MEC, including that:

  • Xcel’s modeling around the acquisition is incomplete and does not consider the entirety of the resources to protect the public interest;
  • The proposal unreasonably shifts risk to ratepayers;
  • The costs are too high;
  • Ratepayers face a high potential for paying for stranded assets in the future; and
  • Xcel has not met the burden of proof to demonstrate the purchase is reasonable under law.

CUB agrees with these statements. In our comments to the PUC, CUB noted that for nearly a decade, the Public Utilities Commission has rejected Xcel’s plans to own MEC or similar proposals that preceded this power plant. Consistently, the PUC has rejected the idea, expressly stating that it did not desire ratepayers to shoulder the risks of this resource, in particular because the energy landscape is highly uncertain, with costs, technologies, and public policy very much in flux. As we said in our comments, the current environment is as uncertain as it has been in years, and it is important for decision makers to be cautious and deliberate about assessing the total resource picture moving into the future.

As CUB has expressed many times, we support Xcel Energy’s commitment toward a 100% carbon-free system, and we advocate that the pathway to 100% be customer-centered. To do so, the PUC must be cautious in deciding whether Xcel should purchase a fossil fuel plant. This means undertaking a thorough review of how the power plant fits into the future pathway. The only way to do this it in the integrated resource planning process. Further, CUB has advocated that the on-going planning process be as transparent and engaged as possible. The Commission has taken strong steps in ordering public meetings throughout the state to hear public comment on how resource planning will impact us.

CUB, along with the parties listed above, have asked the Public Utilities Commission to deny Xcel’s proposal to purchase MEC. Our reasoning is as follows:

  • The decision to purchase MEC is materially relevant to the integrated resource plan and should be considered in that docket;
  • Xcel has not proven that the purchase is in the public interest;
  • The purchase of MEC unfairly shifts risk to ratepayers, contrary to the wishes of the Commission for almost a decade;
  • The energy landscape is too uncertain to make standalone resource decisions and ensure the public interest is met; and
  • Considerable unresolved consumer interest issues have been raised in this docket and the IRP to make this approval reasonable and in the public interest.

In the coming months, CUB will be working with our team of experts (GridLab, Keyes & Fox, and another team member to be announced soon!) to develop a consumer-based approach to Xcel’s integrated resource plan.  CUB will ask the PUC to consider an approach to decarbonization that maximizes consumer benefits, grows clean energy, and empowers customers to be active and engaged users.  Rejecting the purchase of MEC ensures the complete picture is reviewed and customer interest is served.

Author: Joseph Pereira

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