State panel could review Xcel’s biomass project in Ashland (UPDATE)

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By Paul Snyder

The Public Service Commission of Wisconsin is demanding answers from Xcel Energy after estimates jumped $21.4 million for construction of an Ashland biomass plant.

PSC Chairman Eric Callisto said Friday he is disappointed by the increased price. The proposed project would convert the Bay Front Power Plant’s last coal-fired boiler to burn biomass, and the PSC in December approved the work when it was estimated at $58.1 million.

But Xcel, after doing more design and engineering work, this month informed the PSC the cost would be closer to $79.5 million.

“We need to hear what the utility’s expectation is going forward,” Callisto said Friday.

PSC staff members will question Xcel representatives about the project on topics such as a revised cost breakdown, estimates on continued operation of the plant and whether biomass is still the preferred option for the boiler. Biomass is wood or other plant matter that can be burned to generate electricity.

The increase in project estimates also is forcing Xcel to reconsider its plans for the plant, said Don Reck, the utility’s director of regulatory and government affairs.

“Our goal has been to find a way to convert that plant to 100 percent biomass, and we will look at all options,” he said. “The company, too, is disappointed the economics came out the way they did.”

The cost of burning natural gas, which is needed for the biomass system Xcel proposed, sparked the project price jump after engineers discovered the utility would have to burn more natural gas than expected.

If Xcel chooses to abandon its proposed biomass system, the options include retiring the coal-fired boiler, burning only natural gas or using a more expensive combustion system to burn biomass. According to Xcel’s original project application, that system, which would burn less natural gas and could produce more electricity, could cost $130 million.

There is no clear choice, Reck said. Retiring the boiler would make the plant 100 percent renewable, he said, but also cost customers 20 megawatts of electricity.

Furthermore, Reck said, if higher price tags are cause for alarm, using the more expensive combustion system also might doom the project.

“I don’t have a conclusion at my hands right now,” he said.

Callisto and Commissioner Lauren Azar said if Xcel plans to proceed with the project, they want it returned for PSC and public review.

The public needs a chance to revisit the project, according to project opponents such as the Citizens Utility Board of Wisconsin and the Wisconsin Paper Council.

“If nothing changes and we’re looking at a more expensive option, then it’s not reasonable,” said CUB Executive Director Charlie Higley. “The question that still needs to be asked is whether this is needed. If it’s not needed, then those other benefits to Wisconsin — construction jobs and local fuel supply — become a lot trickier to weigh.”

Earl Gustafson, vice president of energy, forestry and human resources for the Paper Council, said Xcel failed to supply the PSC with a complete business plan before the state approved the project.

“One of our concerns was with the ability to acquire fuel for the project,” he said. “The paper industry has a strong interest in using pulp wood and saw logs, and if utilities are using it for energy, it affects prices in the paper market.”