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Xcel Energy’s Minnesota Resource Plan cites need to add generation resources

Plan also calls for increases in conservation

MINNEAPOLIS - Xcel Energy (NYSE: XEL) today submitted to the Minnesota Public Utilities Commission its 2004 Resource Plan, which recommends ways to most effectively meet the growing demand for electricity through 2019.

The plan presents Xcel Energy’s analysis of options to meet a projected 3,100-megawatt shortage of electricity during the next 15 years. The projection is based on an anticipated growth in demand of 1.65 percent annually, or approximately 150 megawatts per year, during the period. The existing system supplies approximately 9,700 megawatts.

“We believe our plan strikes the best balance among several considerations to achieve a reliable, cost effective and environmentally sound energy mix,” said Dave Sparby, Xcel Energy’s vice president of regulatory and government affairs.

“Our plan seeks to increase the level of energy conservation and renewable energy on our system while addressing our need for base-load power by extending the lives of our nuclear generating facilities and developing our next generation of base-load and peaking resources. We believe our plan presents information important to state policymakers and introduces a reasonable and effective approach to meeting increasing demand for electric energy in Minnesota.”

The 300-page plan:

• Identifies the need for adding approximately 1,000 megawatts of new base-load electricity generation by 2015. Base-load plants - usually coal-fired or nuclear plants - are the workhorses of the system, generating electricity 24 hours a day, seven days a week, on low-cost fuel. Preliminary analysis indicates that coal is best suited to meet this need. The plan proposes a flexible, multi-pronged approach to developing options to meet this need, including Xcel Energy-built resources and the Excelsior Energy proposal for an innovative energy facility to be located in northern Minnesota.
• Recommends increasing by nearly 17 percent goals for demand-side energy management programs, which provide financial incentives for customers to reduce electricity consumption. While a number of Xcel Energy’s existing programs focus on reducing peak demand, the plan recommends new programs be developed to more specifically reduce energy consumption to achieve these goals.
• Cites the importance of retaining the value of existing assets - including by extending the operating licenses for the Prairie Island and Monticello nuclear plants, which together provide more than 1,600 megawatts of power - given the need for significant new resources in the future. The one-unit Monticello plant’s license expires in 2010; licenses for Prairie Island’s two units expire in 2013 and 2014. Xcel Energy soon will apply for a certificate of need in Minnesota for a dry spent-fuel storage facility at the Monticello plant and early next year will file an application with the federal government to extend the Monticello plant’s license. The company plans to make similar filings for the Prairie Island plant in 2008.
• Anticipates nearly 1,700 megawatts of wind power on Xcel Energy’s system, an amount sufficient to meet the Minnesota Renewable Energy Objective. The Renewable Energy Objective requires that resources acquired to meet it are consistent with least-cost planning principles and assure system reliability. The plan recommends continued evaluation of issues related to acquiring renewable resources, including extension of the federal production tax credit.
• Identifies the need for obtaining up to 550 megawatts of new “peaking” power resources by 2015 depending on the amount and timing of any base-load resources acquired. Peaking plants are used when demand for electricity exceeds the capability of lower-cost base-load plants. Peaking plants, often fueled by natural gas, routinely are used during times when electricity demand is the highest - which in Minnesota is in the summer when air conditioners are on -or when there is an outage at a base-load plant.
• Cites the importance of ensuring that sufficient transmission resources are available to move electricity from generation sources, including energy from renewable resources, to customers and expresses support for the multi-utility long-term transmission planning effort called CapX 2020, in which Xcel Energy is a partner.

The plan also sets out options in the event any one component cannot be accomplished and highlights the need for significant generation and transmission additions.

“To achieve the results called for in this plan, Xcel Energy will need greater regulatory certainty regarding the timely recovery of our proposed investments,” Sparby said. While the plan does not make any specific proposals in this regard, it notes that these issues will need to be addressed concurrent with the development of new resources.

“We recognize that there will be many views on the issues presented in this plan,” Sparby said. “We welcome the opportunity to engage in a dialogue on these issues and work toward ensuring continued reliable, economical and environmentally sound energy for our customers.”

The Public Utilities Commission will solicit comments from interested parties and may hold hearings during which members of the public can express their views. A decision on the plan is expected within a year.

Xcel Energy’s 2004 Resource Plan can be found on the company’s Web site at www.xcelenergy.com.