Xcel Energy may split utility unit for Minnesota, North Dakota
Xcel is phasing out two older coal-fired generators at its big Sherco power plant in Minnesota and has been investing heavily in wind, solar and biomass power
MINNEAPOLIS (AP) — Xcel Energy has proposed splitting its utility operations in North Dakota and Minnesota, telling regulators that widening policy differences between the two states over clean energy have caused stresses that might best be resolved through a breakup.
But a consultant for the North Dakota Public Service Commission is arguing against the separation, saying there would be "no long-term benefits" for North Dakota, only a "substantial likelihood" of higher costs for customers.
Minneapolis-based Xcel Energy has long had a single unit for its electrical and gas businesses in the two states, Northern States Power Co.-Minnesota. Xcel says it's been a successful arrangement for nearly a century, but the policy priorities of the two states began to diverge almost two decades ago, and the best alternative may be a North Dakota unit that wouldn't be subject to regulatory decisions by other states.
Xcel serves around 93,000 electric and 24,000 gas customers in the Fargo, Grand Forks and Minot areas of North Dakota, making it the largest utility in the state. But Xcel says its North Dakota customers consume only about 5 percent of the total load on its upper Midwest system, compared with 75 percent for Minnesota, 15 percent for Wisconsin, with South Dakota and Michigan making up the rest. Altogether, the five-state system serves over 1.6 million customers.
In response to Minnesota's push for cleaner energy, Xcel is phasing out two older coal-fired generators at its big Sherco power plant in Minnesota and has been investing heavily in wind, solar and biomass power. But that shift away from carbon fuels toward renewables comes with costs that Xcel has sought to pass along to customers, leading to pushback from regulators in North Dakota, a major oil, gas and coal producer.
"We believe that this path to a cleaner and more nimble fleet is both in the best interests of our customers and consistent with our business plans," Aakash Chandarana, an Xcel regional vice president, wrote in a filing with the North Dakota PSC this summer. "We also recognize that this path is consistent with Minnesota's legal and regulatory priorities. We appreciate, however, that this path may not be embraced in North Dakota."
James Heidell, an outside consultant for the North Dakota PSC, wrote in a filing this month that many projects North Dakota has disputed weren't needed to meet energy demand, and that Xcel pursued them at above-market costs to comply with Minnesota mandates.
"These legislative requirements of Minnesota are not shared by North Dakota. NSP's requests to recover a share of those costs from North Dakota customers is essentially asking for North Dakota customers to subsidize Minnesota's energy policies," he wrote.
However, Heidell said, a separation isn't necessary. He said North Dakota has several options that could reduce conflict while allowing Xcel to earn a reasonable profit there, such as a pricing mechanism that doesn't pass along costs of other states' mandates. Another option could be selling off Xcel's North Dakota operations, he said.
Xcel proposes a gradual separation that could be completed around 2020. Xcel has estimated the one-time costs at $8 million to $15 million, half of which would be allocated to the new unit. Chandarana acknowledged the process could get "acrimonious."
North Dakota Public Service Commissioner Brian Kroshus said the PSC plans to hold a formal hearing in late January and decide later. He declined to predict the outcome but said a top priority during the review process will be whether North Dakota ratepayers benefit.
The Minnesota Public Utilities Commission decided last month not to take further action unless and until Xcel presents it with a formal proposal, but to monitor North Dakota's proceedings in the meantime.