It seems that no bad deed goes unrewarded by the University of Colorado-Denver. This week, the UCD School of Public Affairs announced that former EPA Region 8 Administrator James Martin will be one of the winners of its 14th Annual Wirth Chair Sustainability Awards. It’s a curious choice, in light of the fact that Mr. Martin resigned from his EPA position last February amidst scandal.
It’s a story we covered on this blog. Mr. Martin used to work in the administration of former Colorado Governor Bill Ritter. He was the key player in the implementation of the New Energy Economy. From a Colorado Open Records Act Request, we learned that Mr. Martin conducted almost all his official state business from private email accounts. In 2010, Mr. Martin was tapped by the Obama administration to head EPA Region 8, which has jurisdiction over Colorado. Two years later, we performed a Freedom of Information Act request to discern the extent to which he still conducted public business on private accounts. After being stonewalled by EPA, we sued. In the course of that litigation, Mr. Martin misled the EPA, the Department of Justice, and a federal judge about his use of private emails. Specifically, he told the court that, “I have not used this or any other private email account to conduct EPA business.” It turns out this wasn’t even remotely true. Then he resigned.
Unfortunately for Mr. Martin, his resignation didn’t end his troubles. Both the Senate Environment & Public Works Committee and the House Oversight & Government Reform are engaged in an ongoing investigation into why Martin believed that it was ok to use private emails to conduct public business, and then hide these emails from Freedom of Information Act requests.
Here’s where it gets interesting, because now a chastised Mr. Martin seems intent on throwing his former EPA managers under the bus. Under recent questioning from the Congressional Committees, Mr. Martin passed the blame to his superiors, saying that he “wasn’t aware until very recently of the [EPA's] strong preference [to only use work e-mail].” Moreover, he said he did not know “until very recently” that e-mails in his non-official account could have been considered federal records and was never instructed that these e-mails should be forwarded to his work account in order to preserve them as records.
Mr. Martin’s account is not terribly believable. After all, he produced his non-official emails in response to a Colorado Open Records Act request; Why, then, would he think that these records are shielded from a Freedom of Information Act request. Also, he’s a lawyer. He should know better. It’s also a self-serving account. He’s basically saying that, ‘It’s not my fault, because I didn’t know (all evidence to the contrary notwithstanding).’
However implausible it is that Mr. Martin thought that using a private account shielded him from transparency laws, his testimony before the Congressional investigators could prove very damning to the EPA. I don’t doubt for a second that Mr. Martin knew what he was doing was wrong, but that doesn’t change the fact that EPA higher-ups never instructed him that emails in his non-official account are subject to information requests. FOIA training is supposed to be mandatory. Its absence in the case of Mr. Martin is a further troubling sign of this EPA’s aversion to transparency.
In any case, I’m sure that Mr. Martin will be the first-ever recipient of an Annual Wirth Chair Sustainability Award who is also part of an ongoing Congressional investigation of EPA.
According to Xcel Energy’s regulatory filings, the utility spent $275 million in ratepayer subsidies for customer-sited solar panel systems from 2008-2012.*
That breaks down to:
Cost of these solar subsidies for each of Xcel Energy’s 1.4 million Colorado customers.
Percentage of Xcel Energy customers (approximately 9,200) that benefit from lower electricity rates by having subsidized solar panels installed on their property. Although only a fraction of 1 percent of Xcel Energy customers benefit from solar subsidies, 100% of customers pay for the cost of these subsidies.
Cost in Xcel Energy ratepayer subsidies for each of the 3,600 employees that work “throughout the value chain” of Colorado’s solar industry (job numbers are from the Solar Energy Industries Association).
Capital cost per kilowatt capacity of the solar panels subsidized by Xcel Energy ratepayers.** This compares to $2,040/kilowatt for the 750 megawatt Comanche 3 coal-fired power plant in Pueblo,*** and $1,400/kilowatt for a combined cycle natural gas plant.
*See page 1, final column of Xcel Energy, December 2012 RESA budget Report, filed 2 February 2013.
**Capacity of Xcel Energy’s distributed generation solar panel assets—44.9 megawatts—was taken from Section 2.11 of the Technical Appendix to Xcel Energy’s 2011 Electric Resource Plannb (page 341).
***The Comanche 3 cost data is derived from following assumptions: Capital cost–$1.3 billion; and capacity 637 megawatts (85% capacity factor of 750 megawatt nameplate capacity).
To my knowledge, Colorado is the only state in which regulators allow utilities to incorporate a carbon tax into the economic models used to make resource acquisition decisions (see here and here). Ratepayers can’t see it in their monthly bill, but the tax is used in the models, and the models dictate spending. It’s the worst kind of virtual reality: The carbon tax leaps from computers to ratepayer wallets.
The Colorado Public Utilities Commission was authorized to allow for a carbon tax in 2008 with the passage of HB 1164 by the General Assembly. The legislation was advertised as an essential component of former Governor’s Bill Ritter’s environmentalist “New Energy Economy,” but, in practice, the carbon tax has served as an accounting loophole through which Xcel Energy, the largest investor-owned utility in the State, has awarded itself big time profits. In a previous post, I explained in some detail how Xcel uses the carbon tax. Here are a few examples:
- One of Xcel’s priorities is winning market share from independent power producers on the wholesale electricity market. Older natural gas plants are Xcel’s fiercest competitors, because they have already paid off their capital costs, so they can bid electricity prices relatively low. The $20/ton carbon tax eliminates this advantage, because new plants are more efficient than older plants. It tilts the playing field to Xcel’s favor.
- In implementing HB 1365, the Clean Air Clean Jobs Act, 2010 legislation mandating fuel switching from coal to gas for almost 1,000 megawatts of electricity along the Front Range in Colorado, Xcel used the $20/ton carbon tax to obfuscate the price impact. The carbon tax inflated by scores of millions of dollars the baseline rate against which the costs of the law were calculated.
- On HB 1001, Colorado’s renewable electricity standard, Xcel employed the $20/ton carbon tax to circumvent the 2% rate cap that lawmakers had implemented to protect consumers. The effect of the carbon adder is to significantly expand Xcel’s annual expenditures, which increases the pool from which the company can reap profits.
A recent flip flop by Xcel demonstrates the utility’s cynical manipulation of the carbon tax. As part of the 2007 Electric Resource Plan, Xcel committed to building a 250 megawatt concentrated solar power plant in the San Luis Valley in southern Colorado. That deal was finalized in late summer, 2009. Less than a year later, in June, 2010, Xcel petitioned the PUC for permission to abandon its commitment to build the plant.
Investor-owned utilities like Xcel play a delicate balancing act when it comes to capital expenditure. Generally speaking, the more Xcel spends, the more profit it makes, so it has an incentive to press for as much capital construction as possible. However, if the utility builds too much, and prices rise too fast, then it risks a backlash from the legislature, which could lead to the enactment of policies inimical to the utility. The 250 megawatts of concentrated solar power was so ridiculously expensive that Xcel realized it could upset this balance, and thereby risk blowback from the General Assembly.
Altering an Electric Resource Plan is no small matter. There are serious due process issues inherent to unilaterally changing a PUC-approved order. So Xcel needed a good reason for backing out of the solar deal. Specifically, it had to demonstrate that solar power is egregiously cost-ineffective relative to conventional power generation.
For accounting purposes, Xcel calculates the cost of renewable energy relative to natural gas generation. And in calculating the cost of natural gas, Xcel should be bound by the procedures established by Phase 1 of the 2007 Electric Resource Plan, which included, for the first time, the carbon tax. But that would have harmed Xcel’s argument, because the carbon tax would make gas much more expensive vis a vis a carbon free energy source, like concentrated solar power. So Xcel dropped the carbon tax. Here’s how Xcel’s Kurtis J Haeger, Managing Director of Wholesale Operations, justified Xcel’s decision in April 14, 2011, testimony before the PUC.
“We attempted to use the approved resource planning methodologies and factors from the last resource plan as we are directed to do…and in this case, the assumption used in the ’07 Resource Plan was for a carbon tax or carbon proxy to go into effect in 2010. Sitting in 2011, I know that didn’t happen…We updated the assumptions because the carbon assumption we had in the original modeling was not valid anymore.” [Transcript from April 14 PUC hearing, p 19 lines 19-21, 25; p 20 lines 1-4, 12-14]
This rationalization is bogus. It’s been apparent that the Congress won’t put a price on carbon since the fall of 2009, when the Senate shelved a cap-and-trade scheme that had been enacted by the House the previous summer (the legislation was the American Clean Energy and Security Act), yet this didn’t stop Xcel from using the carbon tax in its models.
Fattened profits are a much more plausible reason for Xcel to suddenly flip-flop on the carbon tax. Quite simply, when use of the carbon tax benefited Xcel, the utility wanted to use it. And now that the carbon tax no longer benefits Xcel, the utility doesn’t want to use it.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute
I travelled to Denver twice in the last 7 days to testify before the Senate State Affairs Committee on HB 1291, Colorado’s State Implementation Plan to meet the Regional Haze provision of the federal Clean Air Act.
I told the Committee that HB 1291 is illegal. And I rebutted the distortions peddled by its proponents, who also testified. Illegality and disingenuousness are huge accusations, and I made them twice, in testimonies a week apart, so the bill’s proponents had time to conjure a response. But no one disputed my assertions. Because they were true.
Nonetheless, the Plan passed out of Committee, due to the fact that it enjoys the support of two of Colorado’s richest special interests, for which billions of dollars were at stake. Today, HB 1291 was enacted by the full Senate, by a 25-10 vote. Two weeks ago, by a 58-7 vote, it was passed by the House of Representatives. If there’s one thing a bipartisan, bicameral majority can agree on these days, it’s the importance of currying favor with the deepest pockets.
This is a long blog about the who, what, why, and when of Colorado’s Regional Haze State Implementation Plan, the most outrageous rip-off you’ve never heard of.
The Back Story
Colorado’s Regional Haze State Implementation Plan originated not in the Centennial State, but in Oklahoma. It owes its form to Aubrey McClendon, CEO of Chesapeake Energy, a natural gas company headquartered in Oklahoma City.
As I explained in a companion post, HB 1291, legislation that approves the Air Quality Control Commission’s Regional Haze State Implementation Plan, is an illegal rip-off. Thankfully, there’s a remedy: Senator Kevin Lundberg’s S. 237, would strip HB 1291 of its most cost-ineffective provisions, and thereby save ratepayers at least $100 million in unnecessary costs.
I harbor no illusions about the likely winner when principles (as embodied by S. 237) clash with deep-pocketed special interests (as embodied by HB 1291). Nonetheless, I thought Sen. Lundberg’s legislation would at least get a fair shake. As such, I am genuinely shocked at the lengths to which the forces that stand to gain from HB 1291 have gone to ensure that S. 237 gets swept under the rug.
On Monday, the Senate referred HB 1291 and S 237 to the State Affairs Committee, and a hearing on both bills was scheduled for Monday, April 25. Despite the fact that HB 1291 enjoyed the support of Colorado’s most influential special interests (gas and Excel) and was therefore almost assuredly going to pass by a wide margin, its proponents decided to leave nothing to chance. On Tuesday, the State, Veterans, and Military Affairs Committee moved the hearing on HB 1291 up to April 19, but it left consideration of S. 237 on April 25.
Here’s why this is outrageous: It ensures the Senate cannot even consider opposition to HB 1291! If the Senate approves the Regional Haze State Implementation Plan by enacting HB 1291 on April 19, then there is no reason to consider changes to that Plan (i.e., S. 237) a week later.
This is indefensible. It’s one thing to kowtow to big money. It’s another thing entirely to silence opposing viewpoints with a procedural sleight of hand.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute
What is HB 1291?
On Monday, by a 58-7 vote, the Colorado House of Representatives passed HB 1291, legislation that approves the Air Quality Control Commission’s Regional Haze State Implementation Plan. HB 1291 comes before the Senate State Affairs Committee next Tuesday, April 19.
What is a Regional Haze State Implementation Plan?
In the 1977 Clean Air Act Amendments, Congress created a regulatory program, known as “Regional Haze,” to improve visibility at national parks and wilderness areas. Due to the high uncertainty of visibility science, however, the EPA didn’t have the technical understanding necessary to enforce the Regional Haze provision. In 1980, EPA deferred promulgating Regional Haze regulations until the science improved.
Ten years later, the Congress appropriated funds for a scientific study of visibility that could be used to create Regional Haze regulations. The resultant study provided sufficient scientific grounding for the EPA to promulgate substantive regional haze regulations, in 1999.
As is always the case whenever the federal government issues a new regulation, affected interests immediately litigated. Due to the ensuing delay, it wasn’t until December 2007 that states were required to submit to the EPA a strategy to reduce emissions that impair visibility in order to comply with regional Haze. Such a strategy is known as a Regional Haze State Implementation Plan.
However, only a couple states bothered to submit a Regional Haze State Implementation Plan by the December 2007 deadline. On January 9, 2009, the EPA made a finding of failure to submit all or a portion of their regional haze State Implementation Plans (SIPs) for 37 states. This notice started a two-year countdown to a new deadline for regional haze state implementation plan submissions. January 9, 2011 was the second deadline. As was the case with the previous deadline, most states failed to meet it, although all Regional Haze State Implementation Plans are expected to be submitted to the EPA this spring.
Key facts about Regional Haze:
- It’s an aesthetic regulation—NOT a public health regulation
- States have an unusually large discretion under Regional Haze compared to other Clean Air Act Provisions
Why Did the House Move So Fast on HB 1291?
From wire to wire, HB 1291 was introduced and enacted in 13 days, with virtually no serious debate. The absence of substantive deliberations is notable, in light of the fact that billions of dollars were at stake, and, moreover, that the legislation likely violates existing Colorado statute (more on that later).
Colorado is home to 5,000 wind energy jobs, according to a new, totally unbiased report from the American Wind Energy Association, this country’s premier wind energy lobby. Of course, the study is bogus. I wish I could tell you how the books were cooked. Unfortunately, I can’t read the report, because the AWEA put it behind a $125 pay wall. For now, you’ll have to trust me when I say that wind energy lobbyists are like all other shills; any report they produce will contain gross exaggerations. That’s what they’re paid to do.
Setting aside the AWEA’s bunk study, it is true that there are thousands of wind energy jobs in Colorado. Thanks to wind energy lobbyists, the General Assembly has enacted a spate of expensive energy policies, collectively known as the “New Energy Economy,” which force Coloradans to buy wind energy, among other things. It stands to reason that such policies—those that force Coloradans to use wind energy—would “create” jobs in the wind energy industry.
Is this a good thing? History suggests not. Otherwise, Communism would have worked, right? For a much more sophisticated explanation of the impossible economics of Soviet-style green energy production quotas, see this excellent Independence Institute guest oped by Ari Armstrong. For a technical discussion explaining how wind power is devalued by its intermittent, unreliable nature, check out this testimony, by former California Energy Commission Commissioner Tom Tanton, from a lawsuit being brought against the Colorado Renewable Electricity Standard (full disclosure: I am contributing to this lawsuit. See my testimony here).
Another red flag is the tenuousness of wind energy sector employment. Because the renewable energy industry is based on political support, it is faced with bankruptcy every time political winds change. And that happens a lot. Most recently, it happened last December, when AWEA’s top lobbyist warned that the industry would hemorrhage 55,000 jobs, unless the Congress extended a particularly generous subsidy.
It is also true markets predicated on government policies in lieu of supply and demand, such as the wind energy market, are prone to bottlenecks and oversupply. These defects lead to unfortunate outcomes, such as useless wind farms unconnected to the grid, and the sudden “furlough” of 500 Colorado wind energy jobs.
Let’s not forget the customer impact. The PUC has allowed Xcel to use a variety of budget tricks and accounting gimmicks to hide the true cost of renewable power, but there’s no hiding the increase in utility bills! Absent fuzzy math, wind energy is more expensive than conventional energy. Period.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute
For 4 years, Public Utilities Commission Chair Ron Binz has been a key driver of the New Energy Economy. Under his watch, the PUC changed its mission, from advancing lowest cost electricity, to fighting climate change with expensive green energy. As was first reported here, Binz is leaving life as an environmentalist PUC Chair, for life as an environmentalist consultant. In the wake of Binz’s agenda-driving chairmanship, however, there’s no heir apparent to lead the PUC.
Commissioner Matt Baker arrived at the PUC directly from the sort of career that Binz soon will adopt. That is, he had been a professional environmentalist; the feather in his cap is his successful lobbying campaign for Amendment 37, a green energy production quota. Thankfully, Commissioner Baker has proven unwilling to assert himself, likely due to the fact that he is a tenderfoot. He was appointed to the PUC despite having no relevant experience.
Recently, I’ve made a point of singling out Commissioner James Tarpey as the most reasonable of the New Energy Economy era PUC Commissioners (see here and here). My almost-exact words were, “A PUC with three James Tarpeys would have been a lot different.” (That’s definitely the gist of it.) And yet, in practice, he’s consistently sought consensus rather than follow through on his knee-jerk incredulity at the costs of the New Energy Economy.
The upshot is that Chair Binz’s successor could shape the PUC, if he or she has a willful personality. With this opportunity (or threat) in mind, I put forth the following, pro-ratepayer platform for the incoming Chair. It’s a simple dichotomy: (1) Listen to the staff; and (2) don’t listen to Matt Baker.
Plank #1: Listen to the Staff
In a recent post, I aggressively questioned the Office of Consumer Counsel’s commitment to protecting consumers. In other posts, I’ve expressed doubt about PUC’s concern for ratepayer well being. Where the OCC and the PUC have let ratepayers down, however, the PUC’s staff has been hard at work trying to inject some common sense into these proceedings.
I’ve written before about the Air Quality Control Commission’s outrageous Regional Haze Implementation Plan. In particular, I objected to the plan’s treatment of two small coal fired power plants near Steamboat Springs, Hayden 1 and Hayden 2, because it mandates controls that are at least $100 million more expensive than what is required by the Environmental Protection Agency.
(For a Regional Haze primer, click here. In a nutshell, Regional Haze is unique among the provisions of the Clean Air Act for two reasons: (1) It is an aesthetic regulation meant to improve visibility at national parks, whereas other Clean Air Act provisions are meant to protect public health; and (2) it affords states—and not the EPA—primary authority, especially for power plants smaller than 750 megawatts.)
Back then, when I wrote those posts, I thought that the AQCC’s Hayden controls were egregious; however, I’ve since learned that they are almost certainly illegal. Under Colorado law (§25-7-105.1(1) C.R.S.), a State Implementation Plan cannot impose emissions controls that are more stringent than what the EPA requires. For Hayden 1 and Hayden 2, the AQCC mandated nitrogen oxides controls, known as Selective Catalytic Reduction. But in its Regional Haze guidance document, the EPA states, “We have not determined that Selective Catalytic Reduction is generally cost-effective” for smaller power plants (less than 750 megawatts capacity) like Hayden 1 and Hayden 2. (This quote is in the first paragraph of the first column of page 39136 of the link.)
To recap: (1) Colorado law forbids emissions controls more stringent than what the EPA requires; (2) the Regional Haze State Implementation Plan mandates ultra-expensive Selective Catalytic Reduction for Hayden 1 and 2 power plants; (3) the EPA says that Selective Catalytic Reduction controls are not cost effective for small power plants like Hayden 1 and 2; (4) therefore, the Regional Haze State Implementation Plan is likely in violation of Colorado statute.
The AQCC submitted this (likely illegal) Regional Haze State Implementation Plan in mid-January. Colorado statute allows lawmakers to request a review of any revision to the State Implementation Plan by the bi-cameral, bi-partisan Legislative Council. On February 11 Reps. Jim Kerr and Marsha Looper made such a request; on February 14, they were joined by Sens. Scott Renfroe, Kevin Lundberg, Shawn Mitchell, Keith King, Jean White, Ted Harvey, Mark Scheffel, and Kent Lambert. All Coloradans owe thanks to these legislators.
Last Friday, the Legislative Council held a hearing on the AQCC’s Regional Haze State Implementation Plan. The Council allowed lawmakers until April 4 to submit legislation to revise the Plan; if no such legislation is put forward, the Plan will be sent to the Environmental Protection Agency for final approval. The clock is ticking for a lawmaker to bring the Regional Haze State Implementation Plan in line with Colorado law, by forbidding ultra-expensive controls at Hayden 1 and 2. Otherwise, Xcel ratepayers will be on the hook for at least $100 million in unnecessary costs.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.
As I explain here, two thirds of the Public Utilities Commission care more about advancing “green” energy, than they do about ratepayer protection. I’m sad to say that the same holds true for the Office of Consumer Counsel. Evidently, in Colorado, ratepayers don’t have a public sector advocate.
By any rational calculation, Xcel’s Solar*Rewards program is bad for Colorado consumers. In 2011, the program budget, which is used to subsidize the installation of solar panels, is capped by law at 2 percent of the utility’s retail sales. Despite this cost cap, Xcel already this year has committed 4 percent of retail sales (about $97 million) to Solar*Rewards, so the program is projected to be about $50 million over budget. With this 4 percent of retail sales, Xcel will procure about .38 percent of electricity generation. In sum, the Solar*Rewards program is spending a lot of money, for only a little electricity.