Xcel Energy to refund $56 million to Minnesotans over 2011 outage

Minnesota Attorney General Keith Ellison announced on Thursday that millions of dollars will be refunded to Xcel Energy customers for replacement power costs resulting from a 2011 power plant outage.

In a recent ruling , the Public Utilities Commission (PUC) sided with Attorney General Ellison’s Office and the Minnesota Department of Commerce when it voted to refund Xcel Energy customers tens of millions of dollars, with interest, for replacement power costs.

“As the public advocate for Minnesota consumers, the Department of Commerce Division of Energy Resources advocated for Xcel Energy to refund the millions in extra energy costs to Minnesotans,” Commerce Commissioner Grace Arnold said. "We are pleased to have the Public Utilities Commission take this action."

In Nov. 2011, a turbine failure occurred at Xcel’s Sherburne County Generating Station Unit 3 (Sherco Unit 3), causing the power plant to be offline for nearly two years. During that time, Xcel purchased more expensive replacement power from the regional grid to compensate for the lost power from the out-of-service power plant.

Because utilities must maintain their plants following good utility practices in order to pass on the costs to customers for any replacement power required due to outages, the PUC ordered a proceeding to determine whether Xcel had acted imprudently in maintaining the power plant.

Independent engineers were hired to review Xcel’s maintenance practices and discovered that Xcel did not sufficiently maintain the plant, mainly by delaying an inspection that would have revealed the potential for turbine failure.

On Tuesday, the PUC determined that Xcel should pay the total amount of replacement power costs with interest – minus the amount of a non-public settlement Xcel against the turbine’s manufacturer. The exact refund amount will be announced in the coming months, but it is significantly more than the previous recommendation.

An administrative law judge initially said that Xcel should be required to refund less than half of the replacement power costs because the turbine manufacturer held contributory fault for the outage. However, the PUC sided with the Department of Commerce's findings, arguing that Xcel, not ratepayers, should pay the full amount of approximately $56 million.

"It’s hard to afford your life when your utility company is cutting corners, making mistakes as a result, and trying to stick you with the bill," said Attorney General Ellison.

"Utility companies are effectively monopolies, and while that comes with certain benefits, the tradeoff is that we require these companies to use their resources wisely. My Office works hard to prevent utility companies from passing off the cost of their imprudent behavior onto you, and I am pleased we helped put tens of millions of dollars back into ratepayers’ pockets in this case."

Related: Xcel announces $3 billion investment in MN, creating 5,000 jobs