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A group of large industrial users joined consumer advocates in decrying a bill that would permit Xcel Energy to build a 786 megawatt combined cycle natural gas plant without regulatory approval.
The gas plant, likely to cost more than $1 billion, would replace two coal-fired units at Xcel plant near the town of Becker that are slated for closure by 2026.
Sponsored by Republican Rep. Jim Newberger, whose district includes Becker, the bill was approved by the Job Growth and Energy Affordability Policy and Finance committee yesterday. A companion bill will be heard in the Senate.
Leading opposition to the decision are the Minnesota Large Industrial Group and the Citizens Utility Board, as well as several clean energy groups. A letter signed by dozens of church leaders also voiced objection to the legislation.
In an order on Jan. 11th the Minnesota Public Utilities Commission agreed that a new plant would be needed in Sherburne County but asked Xcel to draft a certificate of need.
The order asks Xcel to describe how energy would be generated and to note for consideration “location-specific factors related to socioeconomic impacts on the local community and regional reliability.”
Attorney Drew Moratzka of Stoel Rives LLP represents the Minnesota Large Industrial Group, a coalition that collectively pays more than $350 million annually for electric energy.
“The ink had barely dried” on the order when Xcel tapped its allies in the legislature to write a bill negating part of the commission’s action, he said, which came in response to changes in the utility’s integrated resource plan.
“This is an end run around the commission’s Jan. 11th resource plan order,” he said. “First, you have an end round around of the process. Second, the bill mandates cost recovery.”
The PUC would lose some discretion in determining how much of the cost will be added to ratepayers’ bills. “That’s pretty troubling,” he said.
The legislation also creates a path for utilities to avoid PUC oversight in future investments.
“For all the customers statewide it establishes horrible precedent,” he charged. “Utilities get to come to the legislature and bypass the regulatory process to build whatever they want and then mandate cost recovery.”
Annie Levenson-Falk, executive director of the Citizens Utilities Board, agrees. The legislation could embolden other utilities to simply get approvals for investments from the Legislature rather than within the PUC process.
The ratepayers could end up “overpaying” to the incumbent utility and its shareholders, she said.
The PUC believed the plant would not be delayed if the utility went through the certificate of need process, Levenson-Falk pointed out. “I don’t think there’s any justification for circumventing that process, which is the only way to protect consumers from being overcharged,” she said.
The argument for building a power plant in Becker to replace the two coal units at Sherburne County Generating Station (Sherco) – which emits more greenhouse gases of any power source in Minnesota – is likely a sound proposal, she conceded.
“It’s probably a good idea to build some generation there,” said Levenson-Falk. “But let’s make sure it’s at the right size, that’s it’s at the right time and in the right place because ratepayers are captive and they end up paying the cost.”
Considering the proposed size, industry estimates suggest the plant could cost $790 million, or a bit more than $1 million per megawatt, based on average costs for combined cycle natural gas plants collected by the financial firm Lazard and vetted by Fresh Energy, publisher of Midwest Energy News.
A gas pipeline could add another $200 million to $300 million to the project, based on data from Energy Information Agency that Fresh Energy compiled. Existing pipelines do not run all that close to Becker, adding a significant cost to the project.
Xcel believes the plant is integral to its plan to create “cost effective electricity” along with clean energy, according to Xcel spokesman Randy Fordice.
The company supports the legislation “to locate a plant on-site at the Becker location and we are working with legislators to demonstrate the importance of the plant to the community – which is facing the closure of two coal units and the economic impact of the retirements (job losses, tax revenue),” he said in an email.
That’s not how many members of the faith community see it.
“We view this as a radical proposal with significant consequences for Minnesota’s future. Xcel Energy – a regulated monopoly – is asking the legislature for a blank check to build an expensive plant, while gutting ratepayers’ only safeguards against unnecessary spending and higher energy bills,” the letter said.
“Higher bills will disproportionately hurt low income communities and communities of color, where Xcel customers pay a greater percentage of their income in electric bills than middle class and wealthy customers.”
Levenson-Falk adds that the legislation is bypassing “a key consumer protection against a monopoly company.”