March 30 (Bloomberg) -- Xcel Energy Inc. is seeking to scale back an expansion of the Prairie Island nuclear plant following a drop in natural gas prices, a filing showed.
Xcel said it is now economical to increase production capacity at the two-reactor, 1,096-megawatt plant by 135 megawatts instead of the 164 proposed in 2008, according to a filing today to the Minnesota Public Utilities Commission.
Natural gas prices “have fallen dramatically” and energy demand will probably grow at a lower rate than projected four years earlier, the Minneapolis-based company said.
The benefit to consumers from the expansion of Prairie Island, located 40 miles (64 kilometers) southeast of Minneapolis, has been cut to $50 million from the previous estimate of $278 million given the drop in gas prices, Xcel said. The revision “reflects the fundamental change in the gas market due to shale gas exploration and the trend of declining natural gas price forecasts,” the company said.
The Energy Department predicts natural gas prices will remain below $6 per million British thermal units through 2020, down from a 2007 forecast for gas priced at $10 per million Btu in 2020, Xcel said in its filing.
Gas futures on the New York Mercantile Exchange fell 29 percent during the first three months of this year to $2.126 per million Btu, the lowest settlement price since Feb. 6, 2002. In 2008, when the Xcel project was proposed, Nymex prices for next-month delivery reached an intraday high of $13.694 on July 2.
Xcel said that cutting the number of megawatts in the project by 18 would reduce costs to $310 million from the initial estimate of $322 million.
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