SB 178: sordid tale to increase renewable mandate
“One hundred nine days into a 120-day session you introduced major [energy policy] legislation,” Senator Steve King (R-Grand Junction) skeptically asked of SB 178 sponsor Senator Angela Giron (D-Pueblo).
Sen. King’s skepticism is justified because SB 178 is a significant policy change that increases Colorado’s renewable energy mandate by 20 percent. Because renewable energy is not competitive with traditional fossil fuels, supporters of the mandate originally included a multiplier to make it more palatable when advancing prior legislation to increase the mandate.
Under current law, for every kilowatt-hour of electricity provided by a renewable resource it counts as one and one quarter hour toward Colorado’s 30 percent renewable mandate. In other words, Colorado’s actual mandate is 24 percent. SB 178 REMOVES the multiplier, raising the mandate significantly and, ultimately, electricity rates.
During testimony on Tuesday, April 24, in the Senate Judiciary Committee, the sordid legislative tale of SB 178 began to unfold. It has been dubbed “son of 1365,” referring to the collusion and fast tracking of Colorado’s infamous fuel-switching bill passed in 2010.
Renewable energy companies are win big with SB 178 because utilities will be forced to either “build more or buy more” renewable energy. No shock that wind and solar advocates testified in favor.
New Energy Economy advocates who still believe that wind and solar are commercially viable energy sources, despite overwhelming evidence to the contrary also win because SB 178 continues to fuel their green fantasies.
Xcel Energy doesn’t show up on a search of lobbyists for and against SB 178, but a number of sources tell me that Colorado’s largest investor owned utility (IOU) has been working hard on this bill at the state capital. Why? Because Xcel has banked significant renewable energy credits (RECs), which they can sell to other utilities in order to meet the higher standard. Also, as energy rates go up, and they will under SB 178, Xcel makes more money because the Public Utility Commission guarantees Xcel’s rate of return. (Example: 10 percent of $100 is a lot more than 10 percent of $75)
The Chinese will be big winners – yes, the Chinese. The more we rely upon wind and solar as a source of energy, the more dependent we become on the Chinese who control 95 percent the world’s supply or rare earth minerals necessary to manufacture solar panels and wind turbines.
Consumers and the economy will lose big. Representing Black Hills Energy, Colorado’s second largest IOU, Wendy Moser testified against SB 178 because Black Hills estimates rates will rise 25 percent in order to pay for the increased mandate. The increase will stifle all economic activity because energy costs will needlessly take a larger percentage of consumers’ and businesses’ budgets.
Large energy consumers such as mining companies and heavy manufacturing which are energy intensive will lose big because their cost of doing business will go up and make them less competitive.
The environment is also a loser; as we have documented renewable energy is neither clean nor green. In fact, if Colorado exacerbates reliance on China, we fuel the pending ecological disaster.
Highlights from testimony on SB 178
- Supporters call eliminating the 1.25 multiplier “leveling the playing field” because it’s time renewables compete in a “free market.” Advocates repeated these catch phrases numerous times, and I assume they did so with a straight face (I only listened to testimony). If they truly believed in a free market, the discussion would be about eliminating the 30 percent renewable mandate rather than just a multiplier.
- Supporter Neal Lurie from the Colorado Solar Energy Industry Association (COSEIA) had the audacity to call eliminating the multiplier good for transparency for consumers. Just a year ago, COSEIA testified against SB11-30 transparency for ratepayers, Senator Scott Renfroe’s bill that would have required IOUs such as Xcel to disclose the actual cost of electricity by fuel source on a quarterly basis. Lurie and COSEIA don’t want consumers to know the real cost of renewable energy because they know it far exceeds the misleading “2 percent rate cap.”
- Black Hills and Tri-State Generation, electricity provider to numerous local co-ops, combined represent roughly 1 million ratepayers in Colorado. Yet bill supporters never consulted either company about SB 178. These two power providers did not find out about this attempt at massive policy change until a few days before testimony. Thank you to Senator King for repeatedly bringing up the timeline.
- The Public Utilities Commission (PUC) continues the 2 percent rate cap sham that we have discredited on numerous occasions. The total cost of renewable energy is not contained within the two percent rate cap on consumers’ bills, see the paper I co-authored with William Yeatman “The Great Green Deception.” Updated figures and brief explanation of how Xcel avoids the 2 percent cap are provided below.*
- Gene Camp of the PUC initially testified that raising the mandate by 20 percent would have no impact on ratepayers’ electric bills. Following a discussion of what will happen to the two percent rate cap, Senator Kevin Lundberg (R-Berthoud) pressed that increasing the amount of energy derived from a more expensive fuel source will increase rates. Silence befell the room for 5 or 6 seconds before Camp then responded that it’s up to legislature because he is unsure what will happen.
- Attorney General John Suthers’ office testified in favor of SB 178 because the current multiplier applies only to Colorado produced renewable power and may be unconstitutional. When Senator Lundberg suggested that Colorado extend the multiplier to all renewable power producers regardless of location, the AG office agreed that likely would satisfy the constitutional issue.
- Senator Ellen Roberts (R-Durango) wondered why no one caught the constitutional conflict before.
- Sen. Lundberg did offer an amendment to extend the multiplier to all states and save consumers money, but it was defeated.
Like HB 1365, SB 178 makes a mockery of the legislative process. This bill smells dirty. Introduced at the last moment and key stakeholders were not even invited to participate. It’s a disaster for Colorado ratepayers. It’s not about consumers or markets or leveling the playing field, SB 178 is about enriching the eco-left and Xcel Energy. That’s no shock because whatever Xcel wants, Xcel gets.
*The following comes from an op-ed I co-authored with energy policy center colleague Michael Sandoval and originally published in January. It provides a brief summary of how the PUC allows Xcel to avoid the two percent rate cap.
It is true Xcel stayed within the two percent rate cap line item labeled the Renewable Electric Standard Adjustment (RESA) on customers’ electric bills. But it is not true that the RESA represents the real, total cost of renewable energy to Xcel ratepayers, and Bakers knows it.
Two years ago in the “Great Green Deception,” the Independence Institute exposed how the PUC allows Xcel to hide the real cost of renewable energy by utilizing two line items on a ratepayer’s bill. Customers pay two percent of their bill through RESA, but the balance of the total cost of renewable energy is captured through another fund – the Electric Commodity Adjustment (ECA) – that is likely the second largest line item cost.
The practice continues today as Xcel’s Robin Kittel explained in direct testimony to the PUC regarding its 2012 Renewable Energy Standard Compliance Plan. According to Kittel, Xcel recovers the cost of renewable energy “through a combination of the RESA and ECA.”
The ECA is NOT subject to the legislatively mandated two percent rate cap. The Public Utility Commission staff’s William Dalton acknowledged the PUC’s role in confusing the public about the rate cap in his September 2009 testimony before the commission:
“This could be a point of confusion to ratepayers and other interested parties…The costs above the retail rate impact limit are recovered through other Commission approved cost recovery mechanisms, primarily the ECA. [Emphasis ours] Once the renewable energy resource cost recovery is allocated to the ECA, cost recovery of these resources is no longer subject to retail rate impact criteria or cost cap.”
According to Xcel’s 2012 Renewable Energy Compliance Plan, ECA costs were $35,280,340 in 2011, but will explode by more than 1000 percent to $354,819,209 in 2021 (thanks also to Colorado’s $20 per ton “phantom carbon tax”). Yet Xcel and Baker [PUC Commissioner Matt Baker] can claim to be within the two percent rate cap for the RESA.
It is easy to be angry with Xcel for all the cost shifting shenanigans, but the blame should be placed on lawmakers and PUC commissioners.