The Minnesota Public Utilities Commission has approved a power purchase agreement between Xcel Energy and a 200-MW Iowa wind farm that the utility says is the “last good-priced” wind available in MISO.

The commission approved the agreement with NextEra Energy Resources’ Heartland Divide II on March 18 over the objections of the state Department of Commerce, which contended Xcel’s acquisition process was flawed (E002/M-20-806). The PPA will provide 50 MW for Xcel’s Renewable*Connect (R*C) program and 150 MW to Google’s Honeycrisp Power, which has indicated an interest in developing a data center in Becker, Minn., in Xcel’s service area.

The 150-MW portion of Heartland will be considered a system resource, with costs recovered through the fuel clause rider. The 50 MW will be paid for by a surcharge on R*C customers; residential customers in the program pay a $6 to $8 premium per month for 100% wind and solar power.

Commerce: Process Flawed

The Commerce Department told the PUC it should reject the PPA because Xcel’s acquisition process violated prior commission orders requiring competitive bidding.

Xcel “did not perform a reasonable exploration of alternatives and did not take any steps to ensure a perception of fairness in the company’s process,” the department said.

The company said it chose a “targeted solicitation” because its previous competitive solicitation in 2019 had fallen short of its needs and that it needed to expand supply for R*C by the end of 2021. R*C is fully subscribed and has a waiting list of 2,500 business and residential customers.

Xcel shortlisted three projects in its 2019 solicitation for 200 MW, but the highest ranked project was unable to bear its assigned interconnection costs; the second project negotiated terms with a different buyer; and the third project, Deuel Harvest Wind, could only provide 100 MW.

The company said the shortfall was illustrative of MISO’s “oversubscribed and behind schedule” generator interconnection queue and increasingly high network upgrade costs, which prompt many projects to withdraw from the queue. (See MISO West Risks Becoming ‘Dead Zone,’ Stakeholders Warn.)

As a result, Xcel said it sought to identify resources in MISO Local Resource Zones 1 or 3 “that had — or that we thought could soon have — transmission interconnection cost surety.” It found two possibilities, one of which was Heartland. The other declined to provide a bid.

Heartland, which is in Zone 3, will interconnect to the MISO system at MidAmerican Energy’s 345-kV Fallows Avenue substation in Adair County, Iowa.

Although the price of the PPA was not disclosed, Xcel said it was comparable to those in the 2019 solicitation and other R*C wind resources and would save customers $97.1 million in present value of revenue requirements.

Heartland “is the last good-priced wind we’re going to see in the existing market,” Xcel Lead Assistant General Counsel Matt Harris told the PUC at its March 18 meeting.

The Commerce Department said that if the PUC approved the PPA, it should limit cost recovery to any shortfall between costs and the revenues from R*C customers and the Honeycrisp electric service agreement.

It said Xcel’s conclusion that Heartland was the only project available was “unilaterally determined,” because the company’s evaluation was limited to only the ones it knew about. It said there was no evidence that Xcel employed an independent evaluator to ensure fairness in the solicitation or had announced publicly it was seeking wind projects.

PUC staff, however, sided with Xcel, saying that the commission had allowed “an informal process when unique circumstances arise such that starting over with a Track 1 [formal bidding] process would be detrimental.”

“In staff’s view, the commission could reasonably determine that Xcel exhausted its options through competitive solicitation, and unique circumstances justified Xcel’s reasons for not beginning another Track 1 process,” it said. “Therefore, staff does not agree with the department that the Heartland PPA should be rejected due to a violation of past commission orders.”

Data Center Still in Early Planning Stage

Staff also cited the “favorable economics” demonstrated by Xcel’s modeling. It took no position on the department’s proposal to cap cost recovery.

But staff also said, “There is some uncertainty in how much additional renewable energy will actually be needed for the data center and R*C.

“Thus, the commission’s decision might benefit from updated information from the company regarding its forecasts for the data center’s usage and R*C demand to ensure that the underlying reasons for acquiring Heartland Divide II are justified,” it said.

Google’s data center is still in the initial planning stages. Xcel’s most recent update, filed in its June 2020 annual report stated, “At this time, Google has not yet notified the company of its intent to proceed with this project.”

At the March 18 meeting, PUC Commissioner Joseph Sullivan said, “We don’t know if that data center is yet going to come into existence.”

That comment was affirmed at the meeting by Harris, who said plans for the data center project were “slowly developing. There is still planning to do.”