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ALJ RECOMMENDATION – DENIAL OF PPA

From the decision:

CONCLUSIONS OF LAW

1. The Minnesota Public Utilities Commission and the Administrative Law Judges have jurisdiction over this matter pursuant to Minn. Stat. §§ 216B.08, 216B.1693, 216B.1694, and 14.50, Minn. R. 1400.5100-.8400, and to the extent not superseded by those rules, Minn. R. 7829.0100-.3200.

2. The Commission gave proper notice of the hearing in this matter, has fulfilled all relevant substantive and procedural requirements of law or rule, and has the authority to take the action proposed.

3. The IEP Statute permits the Commission to amend or modify the initial PPA to raise or lower the amount of the Project’s statutory power sale entitlement.

4. The Project does not satisfy the first prong of the definition of an Innovative Energy Project under Minn. Stat. § 216B.1694, subd. 1(1), because the Final PPA does not assure that coal will be used as the primary fuel and because it has not been established that the Project significantly reduces all of the statutorily identified emissions in comparison to traditional technologies.

5. The Project satisfies the second prong of definition of an Innovative Energy Project under Minn. Stat. § 216B.1694, subd. 1(2), because it is capable of offering a long-term supply contract at a hedged, predictable cost.

6. Since the Project fails to meet the requirements of Minn. Stat. § 216B.1694, subd. 1(1), it is not an “Innovative Energy Project” for purposes of Minn. Stat. § 216B.1694.

7. Since the Project is not an Innovative Energy Project, it does not qualify under Minn. Stat. § 216B.1694, subd. 2(a)(4), as a “Clean Energy Technology” as defined in section 216B.1693.

8. The Final PPA is not in the public interest as required by Minn. Stat. § 216B.1694, subd. 2(a)(7).

9. The Final PPA should not be approved, primarily because of its unreasonable cost to Xcel Energy and its ratepayers, the likelihood that its cost will increase, not decrease over time, and because of the other deficiencies identified in the Findings. While Excelsior Energy and its witnesses have claimed that the PPA cost will become more reasonable in the future, particularly in light of the Project’s environmental benefits, there is not sufficient evidence of that value to overcome the very significant cost difference that exists today.

10. The Project and its technology do not meet the definition of a Clean Energy Technology under Minn. Stat. §216B.1693(c) because they do not significantly reduce all the statutorily identified emissions in comparison to traditional technologies.

11. The Project and its technology do not satisfy the requirements of Minn. Stat. § 216B.1693(a) because the Final PPA is not, and is not likely to be, a least cost resource including the costs of ancillary services and other necessary generation and transmission upgrades.

12. It would be contrary to the public interest for the Project to supply at least two percent of Xcel Energy’s retail load starting in 2012.

Based on the foregoing Conclusions, and for reasons set forth in the following Memorandum, the Administrative Law Judges make the following:

RECOMMENDATION

IT IS HEREBY RESPECTFULLY RECOMMENDED that the Public Utilities Commission order:

1. That Excelsior Energy’s Petition asking the Commission to approve, amend, or modify the terms and conditions of the Final PPA under Minn. Stat. § 216B.1694 be DENIED and that the Final PPA be DISAPPROVED.

2. That if the Commission approves the Final PPA, that it first be amended through negotiations among Excelsior Energy, Xcel Energy, and the Department to address the deficiencies identified in this Report, then returned to the Commission for final approval.

3. That Excelsior Energy’s Petition asking the Commission to determine under Minn. Stat. § 216B.1693 that the Project and its IGCC technology is, or is likely to be, a least-cost resource, thus obligating Xcel Energy to use the plant’s generation for at least two percent of the energy supplied to its retail customers, be DENIED.

4. That Excelsior Energy’s Petition asking the Commission to determine that, under the terms of Minn. Stat. § 216B.1693, at least 13 percent of the energy supplied to Xcel Energy’s retail customers should come from the Units I and II of the Mesaba Energy Project by 2013 be considered in Phase 2 of this matter.

Dated: April 12, 2007

/s/ Steve M. Mihalchick
STEVE M. MIHALCHICK
Administrative Law Judge

/s/ Bruce H. Johnson
BRUCE H. JOHNSON
Administrative Law Judge