Xcel Energy Ordered to Refund Customers for Sherco 3 Failure Costs

(KNSI) – The Minnesota Public Utilities Commission has ordered Xcel Energy to pay back the money it charged customers after the 2011 failure at its Sherco coal-fired generating plant in Becker.

An accident at the giant generator inside Sherco 3 caused the massive turbine blades to be ripped from their mountings, whipping huge metal shards across the plant and sparking a fire. No one was hurt, but the generator was shut down for almost two years while $239 million in repairs were conducted.

Insurance paid for most of that, but the utility had to find a way to replace power at Sherco from its other plants. The PUC let Xcel charge its customers for it.

Xcel sued turbine manufacturer General Electric in 2013, saying corrosion and stress cracks in the blades were to blame and that the company had known about the deficiencies for years but did nothing to address them. The two sides settled in 2018, and Xcel directed the money back to its customers, but the utility’s insurance companies continued to fight it out in court with GE.

Xcel was found to be partially negligent in operating and maintaining Sherco 3 and 48% at fault for the accident’s costs. GE was found to be 52% negligent, but Xcel’s insurers got nothing because they accused GE of “wanton negligence,” but they were only found liable for ordinary negligence.

All of the litigation was settled in 2020, but there has been a fight over replacement power costs ever since. The Minnesota Attorney General’s Office and the Department of Commerce said customers were due a refund, but Xcel said no. Power replacement costs from 2011 to 2013, plus interest, totaled $71.5 million.

In May, a judge ruled that since Xcel was found 48% liable, it should refund its ratepayers 48% of that total, totaling $34.3 million. The judge allowed the refund to be lowered and recommended that Xcel use a portion of its settlement money from GE.

Xcel wasn’t happy with that decision saying it felt as if they already paid for what happened and disagreed with the findings that they were imprudently operating Sherco 3, arguing they have a long track record of safety. The judge mentioned in the ruling that against the recommendations of its own engineers, Xcel put off a full inspection of the generator’s turbines in 2011, knowing full well that doing so could lead to “catastrophic risks.” The utility instead decided to spend money on discretionary non-safety upgrades.

Now, the PUC says Xcel must refund ratepayers $58 million minus credits already received. The actual refund amount has not yet been calculated.

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