Xcel Energy proposes low-cost plan to address coal-fired generation emissions in Colorado

Source: Xcel Energy

Xcel Energy (NYSE: XEL) has proposed a low-cost option to significantly reduce Colorado coal-fired generation emissions, through a combination of retiring, repowering or retrofitting of several power plants as called for under the recently enacted state Clean Air Clean Jobs Act.

The company’s plan has three key components:

• Retires 900 megawatts (MW) of coal generation at its Valmont (186 MW) and Cherokee (717 MW) power plants by the end of 2017 and the end of 2022, respectively;

• Repowers its Cherokee power plant with efficient, natural gas generation of 883 MW. The company also will switch to natural gas generation at the 111 MW Arapahoe unit four; and

• Retrofits about 950 MW of coal-fired generation at the Pawnee (505 MW) and Hayden (446 MW) power plants with modern emission control technology.

Xcel Energy, which supported the Clean Air Clean Jobs legislation, filed its preferred plan with the Colorado Public Utilities Commission (CPUC). The plan responds to a state law passed last spring that required the company to propose reductions in oxides of nitrogen by 70-80 percent by 2017, to meet anticipated federal clean air regulations. The plan would reduce emissions of oxides of nitrogen from the targeted plants by 75 percent at the end 2017, and by 89 percent at the end of 2022.

“Over the next several years, the U.S. Environmental Protection Agency will require the state of Colorado to comply with a series of regulatory mandates unprecedented in the history of the Clean Air Act,” said Dick Kelly, Xcel Energy chairman and CEO. “We believe our proposal is the best way to meet new environmental requirements in a manner that preserves reliability and minimizes customer costs.”

The total cost of the plan, if approved by the CPUC, would result in new construction investment of approximately $1.3 billion over the next 12 years. The company expects that its proposal will result in savings of approximately $225 million when compared to the traditional approach of retrofitting all of these plants with emissions controls. The savings compared to an all-controls approach would be more than $950 million if there is federal regulation that places a price on carbon dioxide emissions.

In addition, when compared to 2008 levels, the company would reduce sulfur dioxide emissions by 84 percent and mercury emissions by 85 percent for the power plants targeted under the plan by 2023. The plan also allows Xcel Energy to meet Colorado’s statewide carbon dioxide reduction goal of 20 percent before the 2020 target.

“Our plan addresses the future of some of our oldest coal-fired power plants at a reasonable cost,” said David Eves, president and CEO of Public Service Co. of Colorado, an Xcel Energy company. “Our prices will need to rise over the next several years as we make investments to meet customer demand, and to enhance our transmission system and replace aging distribution infrastructure.”

The rate impact of the proposed plan is expected to increase future bills on average by 1 percent annually over the next ten years. Eves noted that this was well below the company’s original estimates of 4 percent to 6 percent at the time the legislation was passed.

Xcel Energy studied more than 300 different scenarios in arriving at its preferred plan. The preferred plan is consistent with current and reasonably foreseeable emission reduction requirements, and reduces the company’s long-term risk from federal Clean Air Act and climate regulation.

Together with the company’s other energy and environmental initiatives, the plan will allow Xcel Energy to maintain a balanced energy mix that includes coal, natural gas, energy efficiency and one of the nation’s largest utility portfolios of renewable energy.

Xcel Energy is proposing a new Emission Reduction Adjustment rate to go into effect on Jan. 1, 2011. This adjustment clause will recover the costs incurred under the emissions reduction plan, until rates can be adjusted from time to time to reflect these costs.

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