ALBUQUERQUE, N.M. – Plans for two massive wind farms in New Mexico and West Texas won unanimous approval from regulators on Wednesday, after Xcel Energy came up with a new way to cover its costs during the project’s first couple of years of operation.
Xcel expects Texas regulators will quickly give their approval to the $1.6 billion project, after which construction can begin on the Texas Hale farm in the next few months, said Brooke Trammell, Xcel’s director of customer and community relations.
Construction on the larger Sagamore wind farm 20 miles southeast of Portales is to begin next year, she said.
Xcel operates in eight states. A subsidiary, Southwestern Public Service Co., serves about 385,000 people in New Mexico and Texas.
“I think the company came up with a solution, and I appreciate it,” said Cynthia Hall, member of the New Mexico Public Regulation Commission. “I think that’s a very good deal.”
Xcel President David Hudson called the project an “historic wind energy expansion plan” and said he was pleased with the unanimous vote.
“This fuel-free energy will save our customers hundreds of millions of dollars on their overall energy bills for the next three decades,” he said in a statement.
Average monthly fuel savings could total about $2 for a typical residential customer beginning in 2021.
The project hit turbulence last month, when a state Public Regulation Commission hearing examiner challenged Xcel’s plan to recover lost earnings after the wind farms came online but before the commission eventually approved new rates to recover costs related to the project. That lag can take up to two years.
The plan had won approval from environmental and customer groups, the Attorney General’s Office and the PRC staff.
But after hearing examiner Elizabeth Hurst said the PRC should reject that idea, Xcel came back with a revised proposal that also has the OK from other parties.
Under the plan approved Wednesday, Xcel during the lag period would sell the wind power on the wholesale market – where any utility could buy it – rather than funneling it to its own customers.
That would remove the need for SPS to levy a surcharge on its customers before new rates were approved by regulators – the sticking point for the hearing examiner.
During that lag period, the utility would collect federal production tax benefits attached to wind power generation. If the amount it collected from both its wind power sales and the tax benefits were more than its costs during that time, it would return the excess to ratepayers, PRC lawyer Judith Amer told commissioners.
However, if there was a deficit, the utility would not ask customers “for any kind of payback,” she said.
Once built, SPS estimates customers will save about $2.8 billion over the next 30 years as the wind farms offset higher fuel costs from natural gas and other sources.
The company says the 522-megawatt farm in New Mexico and the 478-MW farm in Texas, combined with an additional 230 MW from a neaby facility owned by NextEra Energy, would provide enough electricity to power about 440,000 average homes annually.