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Commerce Comes Down On NatGas Side of Minnesota Generation Squabble

An administrative law judge's (ALJ) recent recommendation that Minnesota rely on solar power rather than natural gas to meet growing demand for electricity capacity was based on flawed assumptions, according to the state's Department of Commerce, which concluded that one of three "superior" proposed gas projects be chosen.

The Minnesota Public Utilities Commission (PUC) concluded in March 2013 that Xcel Energy had demonstrated a need for an additional 150 MW of electricity generation by 2017 and 500 MW by 2019. Xcel's proposal involved replacing some existing coal-fired electric generation units and adding up to three gas-fired peakers (see Daily GPI, April 17, 2013).

The PUC accepted three proposals for gas-fired generation, including one from Xcel, as well as a proposal from Geronimo Wind Energy for a 100 MW distributed solar capacity intermittent resource, and a proposal from Great River Energy to sell capacity credits.

Xcel proposed first to place in service by 2017 a 215 MW combustion turbine at its Black Dog plant in Burnsville, MN, replacing the plant's coal-fired capacity, which is scheduled to be retired in 2015. Two other new 215 MW gas-fired turbines were slated for Hankinson, ND, to be placed in service separately in 2018 and 2019.

An ALJ tasked with reviewing the issue recently recommended the solar project (see Daily GPI, Jan. 3).

But ALJ Eric Lipman assumed that Xcel may have no capacity needs until 2019, a "significant discrepancy" from the PUC's determination, according to the Department of Commerce. The ALJ appeared to have based his calculation on Xcel's proposed sales forecast in a recent rate case, the agency said.

Based on the PUC findings and "extensive analyses," the Commerce officials recommended that the regulators continue to negotiate the natural gas projects proposed by Xcel, Calpine Corp. and Invenergy, though "it is not expected that all three projects will be chosen.

"Absent differences in the PPAs [power purchase agreements], the department concluded from its analysis that the best package was Calpine's Mankato project combined with Xcel's Black Dog Unit 6 project as needed."

In addition, the influential agency recommended that Xcel issue an all-solar request for proposals "to obtain the overall best solar projects for meeting Xcel's obligations under Minnesota's recently enacted solar mandate," according to documents filed with the PUC. “This approach would also allow more solar projects to bid into this process and provide better information about solar resources."

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