Projecting a need for additional resources starting in 2011, Xcel Energy this week told Minnesota utility regulators that the company plans to initiate an all-source bidding process in 2005 for up to 450 MW of generation to be in service between 2011 and 2013.

Xcel disclosed the news in its 2002 resource plan that was filed on Monday with the Minnesota Public Utilities Commission (PUC). The plan covers the period 2003-2017 and offers Xcel’s analysis of customer needs and resource options under a variety of assumptions to assist in selecting an appropriate path for resource acquisition.

After adjustments, Xcel’s median forecast predicts the peak demand for electricity will be 9,128 MW in 2003, 10,070 MW in 2010 and 11,096 MW in 2017. On the supply side, Xcel owns approximately 5,800 MW of existing non-nuclear accredited production capacity and around 1,700 MW from its Prairie Island and Monticello nuclear power plants. Existing power purchases amount to 1,980 MW in 2003, but decline over time as purchase agreements expire.

In the filing, Xcel said that it may need up to 4,100 MW to 5,800 MW of new capacity by 2017. Also, the company said that depending on the resolution of several pending issues, its resource needs by 2007 could range from zero to over 1,800 MW of capacity.

“Based on our forecasted demand and expected available resources, we anticipate the need to issue an all-source bid solicitation for approximately 450 MW in 2005 for resources to be placed in service between 2011 and 2013,” Xcel told the PUC.

Xcel underscored the point that this expected need and acquisition plan assumes the successful completion of a number of the company’s pending initiatives. Those include the outcome of several ongoing acquisition programs, decisions related to the conversion and upgrade of existing power plants in an emission reduction proposal and the Minnesota Legislature’s consideration of the future of nuclear power.

“If any of these initiatives fail to deliver the expected energy and capacity, we will require additional replacement resources,” Xcel warned. “Reaching consensus on an action plan to hedge this risk will be important to ensuring we are able to reliably and cost-effectively meet our customers’ needs.”

Xcel said that given the pending issues and uncertainties facing the company, it believes it is prudent to acquire up to 500 MW of additional long-term resources, “provided we can achieve flexibility regarding timing of those resources.”

The company said it thinks that it can achieve this flexibility in a number of ways, either individually or in combination. For example, Xcel said it could design a request for proposals (RFP) similar to the Prairie Island contingent-bidding program. In this RFP, the company asked developers to provide bids that included cancellation provisions.

Xcel in October said that it has narrowed to five the number of proposals in the bidding process to determine the cost and availability of replacement power if the company’s 1,060 MW Prairie Island nuclear power plant is forced to shut down prematurely by a shortage of storage space for spent fuel. Companies making it to the short list include Calpine Corp. and Aquila.

Another option might be for Xcel to pursue staged development of company-owned resources with short lead times, like natural gas-fired combustion turbines deployed at existing power plant sites, Xcel told the PUC.

The acquisition of the up to 500 MW of additional resources would be separate from the 450 MW solicitation in 2005, Xcel pointed out.

In order to successfully manage its resources through a period of “significant risk and uncertainty” and to ensure adequate resources, Xcel proposed a five-year action plan that includes several elements.

Under the five-year action plan, Xcel said that it would continue to aggressively pursue the conservation and load management goals established in the company’s 2000 resource plan. “To date, we have been successful in meeting the goals established in the previous plans. We intend to continue to develop new programs to ensure that we continue to meet these goals as cost-effectively as possible.”

The five-year plan also calls for the completion next year of a 2001 all-source bidding process. This process, stemming from Xcel’s last resource plan, seeks to secure up to 1,000 MW of additional resources. Xcel last month said that it had selected 22 proposals from 18 companies for further consideration in the bidding process for power deliveries beginning between May 1, 2005 and May 1, 2009.

In addition, the five-year plan includes the PUC’s approval of Xcel’s pending emissions reduction proposal. This proposal provides 1,500 MW of “environmentally sound, long-term supply,” Xcel said, a net increase of approximately 300 MW over existing plants.

The shorter-term plan also seeks resolution of the future of nuclear generation in Minnesota by the state’s legislature in 2003. “Our analysis indicates that an electricity future that includes nuclear generation is preferable to one that requires shutdown of our Prairie Island and Monticello plants. We have also identified options for replacement resources.” Replacement options considered include acquiring new coal or natural gas generation and the potential for supplementing new natural gas generation with additional wind turbines.

Xcel noted that the issue of nuclear generation comes up in the plan because the 1994 Minnesota Legislature imposed a limit on spent-fuel storage that likely will force the shutdown of Prairie Island plant in 2007 and the one-unit, 600 MW Monticello plant in 2010, if additional on-site storage is not approved.

“We have spent the past eight years working to avoid the need for more casks by advocating alternatives to on-site storage of spent nuclear fuel,” said Dave Sparby, vice president of regulatory and government affairs for Xcel. “While progress is being made both on Yucca Mountain in Nevada and Private Fuel Storage in Utah, these sites will not likely be able to accept enough spent fuel in time to avoid shutdown of the Prairie Island plant in 2007.”

Xcel said that if continued operation of the company’s nuclear power plants is not Minnesota’s preferred option, it would seek legislation expediting Xcel’s Prairie Island alternative involving replacement power and start a solicitation process in the 2003-2004 timeframe for replacement of Monticello’s output in 2010.

Other elements of the five-year plan include the 2005 bidding process for up to 450 MW of generation, as well as continuing to monitor and manage the transition to new market and regulatory structures. On the latter front, Xcel noted that dramatic industry changes brought about by new federal regulations “will continue to influence our ability to plan for, acquire, construct and transmit electricity.”

The filing also gives a nice overview of the state of transmission in Minnesota and the surrounding region. Because a strong hub has developed around the Minneapolis-St. Paul metro area, there is probably some capacity to accept additional generation without significant additions to the transmission system, Xcel Energy said. But bigger projects in the range of 300-600 MW would require new power lines that could have a price tag of as high as $55 million.

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