MN Senate Testimony: In Support of Xcel Energy's Becker Natural Gas Plant
This testimony was originally presented to the Senate Energy and Utilities Finance and Policy Committee on February 2, 2017.
CEE Statement: Natural gas legislation clears way to cut Xcel Energy emissions 60% by 2030
Thank you, Mr. Chair, members of the committee. I’m Mike Bull, the policy director at the Center for Energy and Environment. We support SF 85, as amended — many of the changes that Senator Matthews has made to the bill were recommended by us, and we appreciate his and Xcel Energy’s willingness to work with us. We also appreciate the work that the Department of Commerce, the Chamber of Commerce, and the Minnesota Citizens Utility Board has done to make the bill better.
We supported the Becker natural gas plant during the Commission’s review of Xcel Energy’s integrated resource plan. We knew from our negotiations with Xcel Energy about Sherco 1 and 2 over the past several years — almost from the day I joined CEE in spring of 2013 — that the natural gas plant at Becker was a critical component of a package that Xcel Energy ended up proposing in October of 2015, which included early retirement of Sherco 1 and 2, about 1,800 megawatts of wind, 1,400 megawatts of solar, and a commitment to continue Xcel Energy’s nation-leading energy efficiency achievements for another 15 years.
The gas plant on the Sherco site was important to Xcel for several reasons:
- They needed replacement generation and rate base;
- Studies of operation of the transmission system indicated a need for thermal generation at that Sherco site;
- The utility is facing a log jam of potential power plant retirements in the early 2030s — replacing the Sherco units early with the natural gas plant helped them manage that log jam; and
- The gas plant would help mitigate impacts on the local economy from the early retirement of the Sherco units, both for the City of Becker and for the surrounding area.
The gas plant was so important to Xcel Energy that I’m certain they would not have been able to offer the clean energy commitments in that resource plan — the massive commitments to wind, solar, and efficiency along with significant carbon emission reductions — if the gas plant wasn’t part of that package.
Thus, the gas plant was the linchpin for the single largest clean energy announcement since passage of landmark clean energy legislation enacted in 2007, which I worked on for Governor Pawlenty and which many others in the room worked on as well.
In the Commission proceeding, the Department of Commerce provided a lot of analytic support for the gas plant, which generated significant support among the PUC commissioners, but ultimately the Commission decided to direct Xcel to start a Certificate of Need proceeding on the natural gas plant. I’m confident that the CON proceeding would result in approval of a natural gas plant at Becker, but I understand that community’s need for certainty about its construction and the jobs and tax base that come with it.
One final thought — a lot has been said about the need for Commission process to oversee the ratepayer impacts of this natural gas plant. We absolutely agree with that need, and have worked with the author and Xcel Energy to ensure the Commission has appropriate oversight over both the cost recovery of the gas plant, as well as opportunity to review the appropriate size of the plant. Under the author’s amendment, the cost of the gas plant will be reviewed for prudence and reasonableness in a rate case, and the size of the plant will be reviewed in subsequent resource plans.
Thus, the bill would subject the gas plant to more Commission oversight and process than the analogous $1.2 billion Metropolitan Emissions Reduction Project (or MERP) in the early 2000s to retire two Xcel Energy metro area coal plants and replace them with over 1,000 megawatts of natural gas generation.
The MERP natural gas plants were exempt from Certificate of Need as well as continued resource plan review, and the costs were not subject to the “soup to nuts” rate impact review of a rate case — instead, the costs of these projects were recovered through a special rate rider.
And with that, Mr. Chair, I’ll say thank you for the opportunity to share our support for SF 85, and stand ready to answer any questions you might have.
Image Credit: MPCA Photos