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Xcel Energy jilts E.ON after awarding RFP

by Bill Knowles

WALSENBURG- According to the Colorado Public Utilities Commission (PUC) Trial Staff, Xcel’s recent move against Huerfano County’s Cordova Ranch wind farm developer  “…threatens the PUC’s competitive acquisition rules ….”.   Xcel Energy halted negotiations to purchase power from E.ON Climate and Renewables when it learned it could buy wind energy at a cheaper per megawatt rate elsewhere. 

    That move, along with the motion that Xcel Energy filed with the Public Utilities Commission (PUC) requesting fast track approval to issue a new Request for Proposal (RFP) has drawn fire from the  PUC’s Trial Staff. 

    The PUC Trial Staff voiced both anger and caution in response to Xcel’s Dec. 22, 2010 motion, particularly with regard to the actions taken by Xcel Energy to drop negotiations with E.ON and to press for a new RFP.  The number one concern noted by the PUC Trial Staff is the appearance of impropriety created by Xcel Energy’s statement to E.ON, that it had received a lower cost, unsolicited offer from an unspecified bidder just as negotiations collapsed.  However it must be noted that no laws have been broken.  The PUC has simply made note of an “appearance of impropriety” by Xcel Energy.

    When Xcel Energy broke off negotiations on the Power Purchase Agreement, Patrick Woodson, the chief development officer at E.ON, told the Huerfano World Journal in an interview on Dec. 16, 2010, that “E.ON wasn’t really sure what happened.”  According to a letter, received by the Huerfano County Commissioners from E.ON, the negotiations began falling apart in early December 2010.  “We were negotiating with Xcel Energy and had one year to get the power purchase agreement finalized.  It seemed they stalled for time and then said they are going to issue a new Request for Proposal (RFP).”

    In a separate phone conversation with Mark Stutz, the senior media representative for Xcel Energy, the Huerfano World Journal learned in early December that undefined market forces were driving down the cost of a megawatt of wind energy and that Xcel Energy wanted to take advantage of the reduced costs.  “We need to offer our customers the best rates possible,” Stutz said. 

    In another move the Public Service Company (PSCo), an Xcel Energy subsidiary, filed a motion for extraordinary protection with the PUC dated Dec. 21, 2010.  The motion is a request to protect  “highly confidential, commercially-sensitive and proprietary information concerning wind projects of Northern States Power – Minnesota (NSP-MN) and Southwestern Public Service Company (SPS).  SPS is located in New Mexico.     

    Northern States Power and Southwestern Public Service Company along with Public Service of Colorado are subsidiaries of Xcel Energy and they are all in the wind power generation business.  According to the PSCo motion, wind bids have been offered to NSP-MN and a contract exists between SPS and a unnamed wind developer.  However no details concerning the sealed and proprietary contracts and bids have been released. 

    When asked if NSP-MN and SPS were the late bids referred to by the PUC Trial Staff and if they were the companies who were driving down market prices on wind generated power, Stutz stated that discussions about any contract negotiations are held as confidential by the company.  “We don’t talk about negotiations that are ongoing.  Those companies can release that information if they so chose.  However I can say this, any information that has been found with the PUC is filed for the protection of Northern States Power and Southwestern Public Service Company and is separate from any negotiations that have been going on in Colorado.”     The market for power generation by renewables produced in southern Colorado is already seeing an adjustment downward with targets in solar generation in the San Luis Valley falling steeply from a projected high of 1,129 MW in February 201, to a low of 60 MW in November 2010.  That coupled with the break in negotiations with E.ON, who was lining up to produce 200 MW of wind energy, could bode ill for renewable energy development in Southern Colorado.

    In addition, pressure is continuing to build against Xcel Energy’s proposed Southern Colorado Transmission Line project as well.  A controversial condition in the recommended approval to the PUC by the Administrative Law Judge calls for the SOCO Transmission Line Project to carry 700 MW of solar energy within 10 years of the project going on line.  That condition has provoked Xcel Energy to state that it would pull the plug on the project if the 700 MW condition remains as part of the PUC approval. 

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