Problems continue to plague Xcel's Sherco generator

Repairs following an accident in late 2011 at Xcel's Sherco power plant are proving more difficult to fix than company officials originally thought, which is likely to keep the damaged portion of the coal-fired plant off-line until later this year.

While it has cost the company and its customers millions of dollars, some say a damaged Sherco isn't so bad.

Xcel's Sherburne County Generating Station in the central Minnesota town of Becker is the company's largest power plant in the upper Midwest. Its three generators create enough energy to power more than 2 million homes.

Plant director Ron Brevig said last October that crews were working "around the clock" on the massive effort to restore Unit 3, the largest of the plant's three generators. It's expected to be operating by the end of March.

But five months later Xcel says it won't meet that goal. Brevig now says crews have been delayed several months, in part, because they had to re-do some highly skilled work while reassembling the generator.

"It's the extent of those repairs that really are delaying the return of that machine," Brevig said.

Two or three times per day, trains 115 cars long filled with coal from Wyoming and Montana are unloaded next to the plant in two separate piles.

On November 19, 2011, Unit 3 was coming back online after routine maintenance when a major mechanical failure caused a fire, damaging the machine. The cause is still under investigation. Xcel officials expect repair costs to be between $150 and $200 million, most of which is covered by insurance.

Despite the temporary loss of Unit 3, Brevig said the region's energy system has not been strained.

"We've replaced the power that comes from Sherco through a combination of either market purchases or additional output from our own Xcel Energy generation," Brevig said. "We've got a pretty diverse generation portfolio here in Minnesota."

While filling the gap created by Unit 3's shutdown, the company and rate-payers have benefited from low natural gas prices. Still, documents filed with the Public Utilities Commission show Xcel has spent an estimated $33.2 million to offset its customer's energy needs.

"The Sherco plant has been a bit of an albatross for the last two years for Xcel," said Travis Miller, the director of utilities research at Morningstar, who is tracking the company's repairs.

The price customers are paying to offset energy needs is less today than it could have been just a few years ago when natural gas prices spiked, Miller said. But he said it would be better if the company didn't have to purchase energy elsewhere.

"As a customer you prefer to have the power plants on the system running," Miller said.

While Xcel officials are clear they intend to put Sherco's Unit 3 back together, some say its absence has not been missed.

Kevin Reuther is the legal director for the Minnesota Center on Environmental Advocacy, a group that is part of a lawsuit over Sherco's impacts to air quality in Voyagers and Isle Royale National Parks.

Reuther said not only is there less pollution coming out of the plant, but customer's lights have stayed on.

"There's always concern that removing these big coal plants from our fleet is going to lead to reliability problems, interrupt services, all these things," Reuther said. "Well, this is a real-life experiment in our ability to manage that and Xcel has done it really well. I mean the plant has been off line for what? A year and a half? ... And we're doing fine."

Reuther hopes the Sherco case helps erode the reliability argument for coal energy, Xcel's dominant power source.

But Xcel's Ron Brevig said Sherco's Unit 3 provides customers with cheap energy. He said during the plant's restoration, natural gas prices have remained low, but that may not always be the case.

"While there has not been an enormous strain on the system we still need to bring the machine back as soon as we can," Brevig said.

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