Review of December 8 PUC Hearing on HB 1365: PUC Punts

December 9, 2010 by williamyeatman
Filed under: Archive, HB 1365 

The PUC decided almost nothing during four hours of deliberations yesterday. The two major issues discussed were cost recovery and what to do with the 352 megawatt Cherokee 4 coal fired power plant in Adams county.

Regarding cost-recovery, the debate focused on timing. Xcel wants to be paid up front for the investments required to implement HB 1365; historically, the PUC has allowed cost recovery only after the asset in question has been proved “used and useful.” The text of HB 1365 affords the PUC extraordinary discretion to create a ratemaking regime to incent Xcel to achieve the goals of the legislation, so the traditional ratemaking procedure (i.e., waiting until assets are “used and useful”) is not on the table. Indeed, Xcel’s Statement of Position suggested that the utility will exercise its right to reject HB 1365 if the PUC fails to provide for “timely rate recovery.”

PUC Commissioner Matt Baker sided with Xcel’s proposal to start cost recovery immediately with a monthly fee added to utility bills. Chairman Ron Binz disagreed. He preferred an option that would use deferred accounting to postpone a final decision until the next rate case. There was much deliberation about the meaning of the cost recovery provisions in HB 1365. Commissioner Baker’s interpretation of the text was most generous to Xcel. Commissioner Binz’s interpretation was the least generous. Commissioner James Tarpey’s interpretation fell somewhere in between. The confusion is a bit strange, in light of the fact Chairman Binz co-wrote the cost recovery provisions in HB 1365 with Xcel (Binz’s co-authorship was the subject of lawsuit brought by the Colorado Mining Association to disqualify Binz and Baker from the proceedings). Knowing this, it’s weird that Binz’s colleagues didn’t defer to him.

Regarding Cherokee 4, I went over that yesterday morning.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.

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