EI Policy Forum: Natural Gas and Minnesota’s Energy Future

September 21, 2012

Clean Energy that Works for Minnesota

Mike Bull, ManagerPublic Policy & Strategy

Public Service Company of

Colorado

Public Service Company of

Colorado

No. 1 wind energy provider No. 5 in solar additions Largest green pricing

program (Windsource) 4TH largest DSM program Industry-leading voluntary

emission reductions projects

Xcel Energy

Gas Customers 1.9 M

Electric Customers 3.4 M

Northern States Power Company

Minnesota

Northern States Power Company Wisconsin

Southwest Public Service Company

$0

$2

$4

$6

$8

$10

$12

Natural Gas Forecasts: 2007 vs 2012

Cost per MMBtu

2012 Forecast

2007 Forecast

2012 20202016

4

Balanced Fuel PortfolioKeeps Costs and Risks Down

Changing Power Supply

MN Emissions Reduction Project (2007-2009)

Retrofit King Plant (550 MW)Retire High Bridge and Riverside coal units (656 MW)Construct new NGCC plants at High Bridge and

Riverside (1035 MW)

Black Dog, Units 3 and 4 (Proposed 2015)

Retire two units (253 MW)

Three R’s – Retire, Retrofit, Repower

Black Dog, Unit 1 and 2 (2001)

Retire 176 MW of coal generationReplace with 315 MW of Natural Gas Combined

Cycle (NGCC)

Retire Retire Aging, Aging, Inefficient Inefficient Coal UnitsCoal Units

Retrofit Retrofit Anchor Anchor

Coal Coal UnitsUnits

Wind Capacity Additions thru 2012

Wind Capacity on the NSP System

0

500

1000

1500

2000

2006 2007 2008 2009 2010 2011 Proj 2012

Year

MW

Nuclear Facilities License Extensions

Prairie Island PlantExtended to 2033/34

Monticello PlantExtended to 2030

Potential 2025 NSP Energy Outlook

Coal32%

Wind 20%

Nuclear 28%

Natural Gas 16%

Other Renewables

4%

Benefits of A Balanced Approach

More flexible, reliable system operationally

Modern generation replacing older

Better able to respond to load & supply changes

Significantly reduced emissions

Reduced risks and costs:

Operational, financial, regulatory

Annualized Future Env. CapEx for Utility Coal Fleet

$0.59

$1.95

$4.85

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

NSP Peer CoalUtility: Low

Peer CoalUtility: High

$/MWh

Range For Peer Utilities

Benefits of Early Action

11

12

NSP GHG Reductions from MN Programs

Emissions without state clean energy programs

Emissions with state clean energy programs

Renewables • Mandate began in 2007, 30% by 2020

Energy Efficiency

• Began in the 1990’s, with DSM spending requirement based on revenues

• DSM standard of 1.5% of total retail sales enacted in 2007

Coal Retirements • Metropolitan Emissions Reduction Program, Black Dog

Potential Concerns

“Shale Gale” effect

Prices other resources out of the market

Wind, Nuclear, Coal, Solar

Over-reliance, exports, etc. could increase price and volatility

“Back to the Future”?

Electric-Natural Gas “Harmonization”

E.g. – Pipeline Infrastructure