Xcel says it can cut carbon emissions 60% by 2030 without big jump in rates

Louisville, Kentucky (Platts)--2 Nov 2015 846 am EST/1346 GMT

Xcel Energy is confident it can cut carbon emissions by 60% by 2030 from 2005 levels at a negligible cost to customers, mainly by building two new natural gas plants, adding more than 2,000 MW of renewables and keeping its nuclear plants open, according to Benjamin Fowke, president and CEO of the Minneapolis-based company.

Fowke told analysts during the company's Thursday conference call with analysts to discuss third-quarter earnings that Xcel intends to add 800 MW of wind energy and 400 MW of large-scale solar energy between 2016 and 2020; bring on another 1,000 MW of wind and 1,000 MW of large-scale solar between 2020 and 2030; and construct two gas plants -- a 230-MW peaking facility in North Dakota by 2025 and a 780-MW combined-cycle unit at its Sherco baseload coal plant in Minnesota by 2026.

The company recently reversed course and announced plans to retire two 750-MW units at Sherco in 2023 and 2026, respectively. Sherco's largest unit, 860-MW Unit 3, would continue to burn coal until at least 2030.

Fowke said Xcel can make all of these changes, easily complying with the US Environmental Protection Agency's new Clean Power Plan, without much impact on customer bills.

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"The real issue is going to be, can we build out infrastructure, can we do all these other things and not have that pace exceed customer affordability?" Fowke said. "And I think the answer to that is, yes, we can.

"Cost control is the way you do that. Discipline about your capital investments is the way you do that," he said. "And, we're spending a lot of time on that and I'm very confident this plan is going to be affordable."

Fowke suggested the plan would result in no more than a 2% cumulative rate increase over the next 15 years.

Falling renewable prices should ease the plan's cost-effective implementation, he said.

Factoring in federal production tax credits for wind energy production, "we're seeing wind deals coming to us in the mid-$20s/MWh," he said. Those rates are very favorable, "even in a low gas price environment."

Fowke estimated the PTC saves wind developers around $22/MWh.

"So, without that, wind is at about $47/MWh, a little out of the money." he said.

Along with an increasingly attractive price, wind also is seeing a surge in capacity factors.

"We're seeing capacity factors go from the mid-30s to near 50%. I'm optimistic about it," he said.

Electric sales growth has been mostly flat this year for Xcel. Sales declined 0.2% in the first nine months of the year, with the residential sector leading the way with a 0.6% drop. Commercial and industrial sales were flat.

Teresa Madden, chief financial officer and executive vice president, said the company has adjusted its electric sales assumptions and anticipates flat sales growth for the year.

"It is important to note we will be implementing decoupling for the residential and small C&I customer classes in Minnesota, which should address any declining customer usage trend," Madden said.

--Bob Matyi,
--Edited by Jason Lindquist,

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