State Agencies Object to Xcel Energy, Southern Power Deal
Credit to Author: Aaron Larson| Date: Thu, 15 Aug 2019 13:43:44 +0000
Xcel Energy’s effort to purchase a 760-MW natural gas combined cycle facility in Mankato, Minnesota, from Southern Power, a wholesale energy provider and subsidiary of Southern Company, is meeting resistance from two state agencies.
The Minnesota Department of Commerce (DOC) and the Minnesota Office of the Attorney General (OAG) recommended the Minnesota Public Utilities Commission (MPUC) deny approval of the deal. The DOC and OAG also recommended that if the MPUC were to approve the transaction, that the commission disallow all or a portion of the “acquisitions adjustment,” as well as require certain other customer protections. According to an article published by the Star Tribune, a Minneapolis-based newspaper, if Xcel can’t charge customers the $96 million acquisitions adjustment, the deal wouldn’t be financially viable.
Xcel reached an agreement in November 2018 to purchase the two-unit plant from Southern Power for approximately $650 million. Xcel subsidiary Northern States Power Co.-Minnesota (NSP-MN) currently purchases the energy and capacity of the Mankato Energy Facility through power purchase agreements. Xcel claims the acquisition would provide net customer savings of about $50 million to $150 million over the life of the plant.
But the DOC disagrees with the analysis. In a filing with the MPUC, it said the ownership change was unlikely to create significant savings. The department suggested economic modeling performed by Xcel was invalid and inappropriately inflated the value of the Mankato facility.
In May, Xcel reached an agreement with a coalition of groups that includes Clean Grid Alliance, Center for Energy and Environment, Minnesota Center for Environmental Advocacy, Union of Concerned Scientists, Fresh Energy, Sierra Club, and LIUNA Minnesota and North Dakota. As part of that deal, the company agreed to retire its last two coal plants in the Upper Midwest in exchange for the coalition’s backing of its Mankato Energy Center purchase. The 511-MW Allen S. King Generating Station in Oak Park Heights, Minnesota, will be closed in 2028, and the 876-MW Sherburne County (Sherco) Generating Station Unit 3 in Becker, Minnesota, will be closed in 2030. Xcel’s Upper Midwest Energy Plan also proposes to add 1,850 MW of wind capacity by 2022 and more than 3,000 MW of solar capacity by 2030. It aims for 100% carbon-free electricity by 2050.
The Mankato facility was built as a single, 375-MW unit by Calpine in 2006. Southern Power announced it was acquiring the plant in September 2016, and subsequently expanded the facility. The second unit was completed in June.
Xcel has a Sept. 27 deadline with Southern Power to obtain regulatory approval. If the MPUC rejects the deal, Xcel is prepared to buy the plant through an unregulated subsidiary, according to the Star Tribune. In that case, Xcel would essentially own the plant under one company and purchase power from it under another.
The Federal Energy Regulatory Commission approved the Mankato Energy Center sale in May. The MPUC is expected to hold hearings and decide the matter by the end of September.
—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).
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