Xcel Buys Minnesota Gas-Fired Plant

Xcel Energy said it will buy a natural gas-fired power plant in Minnesota from Southern Power, a subsidiary of Southern Co. The $650 million deal for the Mankato Energy Center puts Xcel in charge of a facility from which it has purchased power since the plant’s first unit came online in 2006.

A second unit at the plant is expected to come online in 2019, bringing the facility’s total power generation capacity to 760 MW. That would make it the largest gas-fired plant in Xcel’s fleet. The plant was built by Calpine Corp. and sold to Southern Power in 2016 in a $395.5 million deal.

“Securing the Mankato gas plant is a great value for our customers as it will provide significant cost savings and operating flexibility for the long term,” said Chris Clark, Xcel’s regional president, in a statement November 6. “As we continue to transition to cleaner energy sources and reduce reliance on coal, this plant will help us continue to deliver reliable electricity while keeping bills low.”

Xcel said the purchase is part of a plan to secure electricity as it looks at power purchase contracts that will expire over the next 10 years. The utility in a statement said, “Acquiring this plant now provides certainty that energy from these newer generating units will be available and benefit customers over the life of the plant compared to simply purchasing the output. These benefits include more flexibility as we continue to add renewable energy and analyze the future of our always-on power plants, as well as reducing the risk from expiring power purchase agreements in the next decade.”

State regulators still need to approve the transaction, with a decision expected in mid-2019.

Xcel said it has about 100 workers in the Mankato area, some at a service center and some at the Wilmarth Generating Station, a small 18-MW power plant on the Minnesota River that burns refuse-derived fuel, a burnable fuel produced from municipal solid waste. Xcel is building a new transmission line in the area to upgrade its electricity distribution in the region.

The company said the 27 current employees at the Mankato Energy Center will be offered jobs with Xcel.

“Xcel Energy has a long history of serving customers in the Mankato area. Securing this plant gives us the opportunity to deepen our ties to the community,” said Clark.

Xcel in a securities filing said that when the second unit at Mankato comes online, the plant “is expected to operate as a single high-efficiency natural gas-fired combined cycle power plant.”

Xcel also has plans to build an $800 million, 786-MW gas-fired power plant in Becker, Minnesota. That plant would replace two coal-fired units at Xcel’s existing 1,360-MW Becker plant, which is scheduled to close by 2026.

The utility over the past year has announced moves to reduce its use of coal-fired generation and increase its renewables portfolio, including an ambitious “Colorado Energy Plan” representing a $2.5 billion investment.

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).

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