State regulators approve Xcel plan that shifts from coal to nuclear energy, renewables

Minnesota utility regulators on Tuesday unanimously approved Xcel Energy's long-term plans for power generation, which are aimed at reducing greenhouse gas emissions while maintaining reliable and affordable electricity.

The Public Utilities Commission (PUC) gave the go-ahead for Minneapolis-based Xcel to close its coal plants by 2030, extend the life of its Monticello nuclear reactor by 10 years to 2040 and add a fleet of new solar and wind farms.

Commissioners also approved — in concept — Xcel's plans to build new two new transmission lines. And as expected, the PUC deferred a controversial decision over whether Xcel should build two new gas-fired power plants.

"This is a very good outcome for Minnesota and for Xcel's ratepayers," Commissioner Matt Schuerger said at Thursday's PUC meeting.

There were no surprises Tuesday as the PUC essentially adopted a broad agreement between Xcel; four clean energy groups; three labor unions; and the Citizens Utility Board of Minnesota (CUB), a ratepayers advocacy group.

The agreement is "compelling," said Katie Sieben, the PUC's chairwoman, "The combination of resources will ensure a reliable [electric] system well into the future."

Minnesota's investor-owned electric utilities must file resource plans that focus on the next five years but also looks beyond. The PUC pays particular attention to Xcel, by far Minnesota largest electricity provider with 1.3 million customers.

Xcel filed its most recent resource plan in May 2019, updating it last year. It's packed with significant changes, and includes the first ever "energy equity" provisions in an Xcel resource plan.

Xcel must establish a "stakeholder group" to foster energy equity, which refers to improving the access of disadvantaged communities to clean energy and energy efficiency.

For Xcel, that would include designing programs to ensure that "distributed energy" — like community-owned solar gardens — is available "to low-income, Black and Indigenous communities of color that have disproportionately borne costs of unjust and inequitable energy decisions," the PUC ruled.

Xcel must also form an "environmental justice accountability board," and submit a plan — mostly likely by next year — to bring its workforce's racial and gender diversity in line with its stated goals.

"I have been impressed with some steps the company has taken on diversity and equity," PUC Commissioner Valerie Means said at a recent PUC meeting. "But It is clear there is a lot more to do."

Central to Xcel's latest resource plan are the early closures of its Allen S. King coal plant in Oak Park Heights in 2028 and its Sherco 3 generator in Becker in 2030. The PUC already has approved early shutdowns of Xcel's Sherco 2 and Sherco 1 coal generators in Becker in 2023 and 2026, respectively.

Xcel's latest resource plan originally called for a roughly $800 million natural gas-fired power plant in Becker to replace some electricity lost by the coal closures. But clean energy groups opposed it, saying it wasn't cost efficient and would work against Xcel's own goal of 100% carbon-free power by 2050.

So Xcel dropped the Becker gas plant plan in June. At the same time, the company announced plans to build two smaller gas plants — one each in southwestern Minnesota and North Dakota — at less than half the cost of the Becker plant.

Unlike the proposed Becker gas plant, these would be "peaking plants," designed to run only when the grid is stressed by peak electricity demand — on very cold or very hot days, for instance.

But clean power groups opposed the new plan, too, saying renewable power, particularly solar — coupled with a fleet of grid batteries for storage — is cheaper and just as reliable as a new gas peaking plant.

In late January, Xcel agreed to kick the gas plant issue further down the road. The clean energy groups agreed to support Xcel's bid to extend the federal license of Xcel's Monticello nuclear plant, which expires in 2030.

That extension still will require a separate PUC proceeding for the addition of more nuclear waste at the Monticello site. And of course, Xcel must obtain permission from the U.S. Nuclear Energy Commission, a long process.

Monticello's extension has been opposed by the Minnesota Department of Commerce. Its economic modeling shows that keeping Monticello open isn't cost-effective. But that's not the case for Xcel's two Prairie Island nuclear generators in southeastern Minnesota, whose licenses expire in 2033 and 2034, Commerce concluded.

"By far the most cost-effective decision is to extend Prairie Island," Stephen Rakow, the Commerce Department's energy economist told the PUC.

Xcel would like to keep Prairie Island running, too, but it has put off that decision until its next resource plan. The company says it's discussing the matter with the Prairie Island Indian Community, which is located next door to the plant and its toxic waste casks.

The PUC also approved Xcel's broad plans for two new power lines that would be built in the late 2020s. The biggest would cost over $500 million and run 140 miles from Xcel's massive coal complex in Becker to southwest Minnesota.

Both lines would allow Xcel to maintain its valuable transmission rights at its coal plants once they are closed — significantly reducing costs for grid interconnection. New renewable energy projects would be hooked into the new power lines.

Clean power groups have lauded the proposal. But some parties – including large industrial power users and the Minnesota Attorney General's Office — have criticized Xcel for its planned ownership of renewable power plants that would be hooked into the transmission lines.

Xcel says regional power grid rules require it do so; the Attorney General's Office says such an arrangement would inflate costs that would ultimately be borne by ratepayers. PUC commissioners, too, noted concerns about costs.

However, both power lines will have to go through extensive PUC proceedings even though they were approved as part of a master plan Tuesday.