Nuclear Plant Bill Riles, Confuses, Perhaps Conspires

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There is a pair of bills working their way through the Minnesota state legislature that would change the way Xcel Energy can pay for certain costs of maintaining and upgrading its nuclear power plants between now and their eventual final shut down several years hence.

This bill has a strange and unusual set of detractors and supporters. It is supported by some Republicans and some Democrats. It is opposed by the usually conservative Chamber of Commerce (of Minnesota). The usual indicators of whether this is a good bill or a bad bill are ambiguous. Cats and dogs are lying down together on this one. This will require … wait for it … thinking! So let’s give that a try.

I’m going to give you a giant pile of information and maybe you can help figure this bill out. But since this isn’t a mystery novel, I’ll tell you up front what I think. This is a proposed law that will fix a problem that doesn’t seem to exist. It appears that there is nothing stopping Minnesota’s Xcel Energy, the maintainer of the nuclear plants in this state, from maintaining its plants. At the same time, Minnesota has a strong and effective, if often annoying to some in the energy business, Public Utility Commission (PUC). This bill seems to weaken the role of the PUC in future decisions about the nuclear plants. The Public Utility Commission is probably overly bureaucratic and at times inefficient, because it is a government agency. But the nuclear power industry is historically untrustworthy and, of course, profit driven. Given the lack of visible problem, and the lack of the bill’s supporters to articulate a problem that needs to be solved, and the exceeding obscure language used in the bill, and the fact that similar bills are being introduced in legislatures across the country, I’m giving this bill the evil eye.

Criticism of the bill suggests that it guarantees that energy company Xcel’s customers (as opposed to the company and its shareholders) will cover the cost for nuclear plant upkeep. The bill would allow Xcel Energy to file for additional funding any time there is a change in costs with reduced or minimal Public Utility Commission (PUC) input (though this changes with different iterations of the bill as it is amended, possibly). Xcel would be able to add “riders” onto its rate structure to guarantee return on investment into the nuclear plants. (It might be helpful to know that Minnesota has three nuclear reactors located in two plants, which currently provide about 20% of the energy used in the state.)

Critics are concerned that there is no cap on spending, which is why this is sometimes called a “Blank Check Bill.” And, the bill seems to diminish the ultimate power of the main regulatory agency overseeing the nuclear plants in Minnesota, the Public Utility Commission.

An opposition group FAQ notes:

Q: Xcel’s CEO has claimed this is a “good deal” for customers; why do you think differently?

A: This bill is the equivalent of giving a credit card to a teenager that’s already proven they can’t
be trusted.

Xcel has a terrible track record of managing costs on nuclear plants. Xcel claimed that
Monticello nuclear plant upkeep would cost Minnesotans $320 million; their mismanagement
ballooned costs to $748 million. Then Xcel turned around and asked the PUC to ensure
shareholders profited off of their $400 million mistake. The PUC said, “no”.
Xcel’s bill eliminates the PUC’s power to protect customers and removes any barrier between
their shareholders and profit. If Xcel makes another $400 million screw up, Minnesotans will
pay for it.

Here is the bill.

A bill for an act relating to energy; establishing a carbon reduction facility designation for certain large electric generating facilities; proposing coding for new law in Minnesota Statutes, chapter 216B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1. [216B.1697] CARBON REDUCTION FACILITIES; NUCLEAR ENERGY.

Subdivision 1. Qualifying facility. A carbon reduction facility is an existing large electric generating power plant that employs nuclear technology to generate electricity.

Subd. 2. Proposal submission. (a) A public utility may submit to the Public Utilities Commission a proposal to designate a carbon reduction facility under this section. The proposal must:

(1) demonstrate that the facility meets the requirements of subdivision 1; and

(2) include a proposed statement of the total expected costs, including but not limited to capital investments and operation and maintenance costs associated with the facility’s operation.

(b) If the information submitted in the original proposal changes, a utility may at its sole discretion and at any time file additional proposals for the same facility.

Subd. 3. Proposal approval. (a) The commission must approve or reject the proposed facility designation and the total expected costs submitted by the public utility. The commission must make a final determination on the petition within ten months of the filing date.

(b) With respect to any carbon reduction facility, approval by the Public Utilities Commission constitutes a finding of prudency for the proposal’s total costs. The utility is entitled to recover any documented costs that do not exceed the costs provided in the carbon reduction facility designation proposal using the carbon reduction rider under subdivision 4 or a subsequent rate case.

(c) If additional proposals are filed for a single facility, the commission must treat each proposal the same as an original proposal under this section.

Subd. 4. Carbon reduction rider. A public utility may annually petition the commission to approve a carbon reduction rider to recover a qualifying facility’s total costs outside of a general rate case proceeding under section 216B.16. In the filing, the public utility must describe the costs the public utility seeks for rider recovery.

Subd. 5. Rider approval.

(a) The commission may approve, modify and approve, or reject the proposed carbon reduction rider.

(b) The commission may approve a rider that:

(1) allows the utility to recover the facility’s total costs;

(2) allows an appropriate return on investment associated with the facility;

(3) allocates appropriately between wholesale and retail customers; and

(4) recovers costs from retail customer classes in proportion to class energy consumption.

The Chamber of Commerce says the bill will move financial risks to ratepayers and from the company and reduce the relevance of the Public Utility Commission (PUC). Governor Dayton opposes any bill that weakens the role of the PUC, and is quoted in the Star Tribune as saying, “These end runs to the Legislature to try to give special interests what they want violates the whole purpose of the Public Utilities Commission.”

One of the Senators on the energy committee, Democrat John Marty, noted that Xcel “didn’t like the results they got from the commission [previously, and are now] tying the hands of the commission.”

The position of the Republican sponsors is echoed in a statement by Democratic Senator John Hoffman, who is ranking member of the state Senate’s energy committee (and a guy I have a lot of respect for), in his newsletter:

The Energy and Utilities Finance and Policy committee discussed SF 3504 this week, also known as the “Nuclear Rider” bill. This bill creates an efficient channel for public utility proposals involving nuclear power plant maintenance projects. It also allows for electric companies to petition to add a “carbon reduction rider” onto customer electric bills in order to finance those projects. Nuclear plants are an important source of energy in the Upper Midwest, with Xcel Energy’s two Minnesota plants alone generating 30% of the region’s electricity. These plants are both reliable, have strong safety records, and operate nearly carbon emission free. To continue this service, the nuclear power plants must undergo costly maintenance projects. This bill is intended to aid in the funding and completion of those projects in a timely fashion.

Opponents have called SF 3504 a “blank check” to Xcel Energy because it does not specify limits to the cost of projects or to the amount of the rider. There is a concern over how much this will end up costing ratepayers. As a ratepayer I have the same concerns, however, this is not a “Blank Check.” These rider proposals will not go unchecked; each will still be reviewed and potentially modified by the Public Utilities Commission. Additionally, Xcel will be expected to adhere to the budgets originally proposed and all overruns will have to be re-approved by the commission. That is accountability. I only wish our HMO’s had the same transparency and accountability built in to their existence. Matter of fact, I wish our Health Care HMO’s operated like our Utility providers. That my friends is another argument.

This bill ensures that nuclear energy will remain a safe and reliable way of meeting Minnesota’s energy needs while reducing our carbon footprint. It passed through the Energy and Utilities committee on Tuesday and will make its way to the Senate floor shortly.

It may be the case that the initial version of the bill went over a line of some sort, and it has been revised. From the Star Tribune:

The bill originally did not allow the PUC to modify Xcel’s nuclear cost recovery requests, giving it only an up-or-down vote. The amended bill allows the PUC to modify Xcel’s requests.

The bill was amended again during Tuesday’s hearing to address concerns about a new “rider” — i.e., a separate line item — that would have been added to customers’ bills for nuclear improvement costs. The amendment, brought forward by Osmek, axed the rider in favor of nuclear cost recovery through a rate case, the traditional path.

Opponents, including the Chamber of Commerce, said after the hearing that rate case recovery was better than a rider, but they remained opposed to the legislation.

Of concern is the fact that several similar bills are working their way through legislatures across the country. This is often a signal of dark money at work. Also, note that the language used in the bill is a good example of green washing.

Fresh Energy is a state-wide think tank that addresses clean energy development in Minnesota, and I find them to be the go to place for policy in this area. According to Matt Privratsky, their Director of Public Affairs (from written testimony):

While Fresh Energy wholeheartedly supports Xcel’s business plan to become 85 percent emissions free by 2030, we cannot support abandonment of consumer protections as Xcel proposes in this bill. This bill would place an unnecessary risk on Minnesota rate payers, the energy system they rely on, and the workers and communities who keep that energy system going. In short, though it aims to address a very critical issue – aging nuclear plants – it very clearly falls short.

Even with changes made in the amendment, the risk to rate payers in this bill is significant. There is no cap on the amount of money Xcel may spend to repair and operate its nuclear plants, and, even though the amendment seems to allow the PUC to modify the amount needed for repairs and operation, Xcel Energy alone is still able to decide whether to proceed under those parameters. Later this spring, an independent engineering report will be released that details the repairs necessary at each plant and estimates how much they will cost. Rushing a bill through the process without numbers in front of you seems irresponsible, especially considering it will be Minnesota residential, commercial, and industrial rate payers on the hook to pay.

The bill would also put our energy system at risk by short changing the comprehensive process used to review investments of this size. Last year, Xcel sidestepped the PUC in favor of direct legislative approval for a large power plant, leading Governor Mark Dayton to unequivocally state that, going forward, he would “not accept any bill that limits or weakens the Commission’s authority to protect the interests of Minnesota’s energy consumers.” Though the amendment makes it appear as though proposals will be reviewed as part of a comprehensive resource plan, this bill short changes that process. Unless there is a significant change of position by the Governor, this bill will have little chance to become law.

Lastly, this bill does very little to address the issues facing these power plant communities and others across the state. Several other states have sought to address ways to ensure continued operation of aging power plants and to better prepare for their eventual closure. But those were comprehensive packages that address transition aid for local tax payers, support for worker retraining programs, commitments for worker pensions, programs to expand clean energy options to people of low incomes, expand renewable energy commitments, and more. This bill doesn’t actually even include a commitment to keeping the plant open, so it really only represents the narrowest of concerns – protecting Xcel’s shareholders.

The point about there being a report as to how much this all may eventually cost, coming out after this bill would be passed, is potentially important. Why not wait until after that report? If this bill is passed, will we have regrets?

There is a good chance that if this bill is passed by the House and Senate, it will be vetoed by Governor Dayton. This bill may, however, be an interesting historical note once the instances of similar legislation across the country are examined and contextualized. Who is behind the bill? Is this an ALEC project? Koch Brothers? Nobody?

Stay tuned.


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2 thoughts on “Nuclear Plant Bill Riles, Confuses, Perhaps Conspires

  1. Xcel is very heavily regulated. To the point where its profits are even regulated, along with the rate it can charge customers. It has to return excess profits to its customers.

    So it is a for profit company – but a heavily regulated for profit company.

    I hope we keep our nuclear power plants repaired and at full operating capacity for as long as possible, because we need that 20% baseload capacity in Minnesota.

    I am not aware of whether this bill will help or hurt that objective, so thanks for bringing this bill to my attention.

    I will have to educate myself (as Al Gore once said).

  2. Greg I think all that’s needed to come to the conclusion this is a giant FU to the rate payers is that it’s them that will get stuck paying for the overages and the PUC can’t prevent it. That is pretty much a guarantee that Xcel will max that credit card out and share the dividends with their shareholders.

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