Customers or shareholders: Xcel, state divided on who should pay for Prairie Island outage

Xcel Energy workers cut underground cables that caused a monthslong outage at its Prairie Island nuclear power plant, and now the energy company wants customers to pay most of the costs for that mistake.

For now, that tab is north of $23 million for the cost of energy bought on the open market to replace the lost nuclear power in 2023. Gov. Tim Walz's administration and Attorney General Keith Ellison, however, say the responsibility of shouldering the bill should fall on Xcel shareholders instead.

"Xcel's failure to manage its contractors fell far below what is expected of a reasonable and prudent nuclear plant operator," read a regulatory filing Assistant Attorney General Peter Scholtz signed. "The Company's ratepayers should not have to pay for the results of its imprudent conduct."

The Minnesota Public Utilities Commission (PUC) will decide whether to refund any costs to customers, though the five-member board is still taking input on the issue and hasn't scheduled it for a vote yet.

The price for replacement power for the outage at Unit 1 and Unit 2 in 2023 was about $33.8 million, according to the Minnesota Department of Commerce, but data the state agency released showed the company also saved an estimated $10.3 million by not running the plant, lowering the overall cost.

The full price tag for the incident will be higher, though, as Xcel hasn't calculated replacement power costs from 2024 yet. The company also plans to ask for customers to bear $9 million to $12 million for cable repair, building that into its next electric rate case.

Xcel acknowledged it caused the outage. Workers cut through a bundle of cables, interrupting power to some equipment and causing one of two reactors at the Red Wing plant to shut down. The company told federal nuclear regulators it did not use ground radar in an area that would have shown the cables' location and admitted its excavation planning and oversight was inadequate.

Still, Xcel argued it should not have to refund to customers those extra energy costs because it was operating prudently and in good faith despite the unintentional outage. Those workers were helping with an unrelated cable replacement project at the time, maintenance that Xcel said was necessary.

"Prudence does not mean perfection, and even prudent decisions and operations can sometimes result in undesirable outcomes," Xcel wrote in a March filing with the PUC.

Xcel also said it was able to do some maintenance on the plant while it was down that otherwise would have necessitated a future shutdown.

Company spokesman Kevin Coss said in a written statement Wednesday that Xcel customers "have benefitted from extremely reliable operations at the Prairie Island nuclear plant over a longer horizon."

"Over the past five years, our nuclear fleet has performed above the national industry average, based on unit availability," Coss said. "Prairie Island regularly operates through heat waves and extreme cold."

Scholtz and the Attorney General's Office, however, found Xcel's oversight of the excavation project lacking. The attorney general wants Xcel to bear the costs of replacement power in 2023, though it only addressed Unit 1 in the filings. Commerce said Xcel should pay for most, though not all, of the costs from the outage.

Prairie Island is a critical part of Xcel's plans for a carbon-free electric grid by 2040 and provides enough power for more than 1 million customers in the region. Unit 1 there shut down Oct. 19, causing a longer-than-expected outage at Unit 2, which had powered down two weeks earlier for scheduled refueling and maintenance.

Xcel initially said it expected the plant to be running in January, and Unit 1 was back online Jan. 30 after a 103-day absence. Unit 2 could have returned in early February from the cable problem, but separate issues kept it offline until March 19.

"The need to exercise reasonable care was heightened in this case because the excavations took place at a nuclear power plant," the Attorney General's Office wrote. "Nuclear plants are heavily regulated by the federal government to ensure safe operation due to the risks that nuclear incidents pose to the public and the environment."