Carbon tax repeal moves out of committee

February 15, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

On an 8-4 vote, the House Ag Committee moved HB 1172, repealing Colorado’s carbon tax, out of committee for consideration by the whole House. One Democrat Wes McKinley joined all seven Republicans Representatives Paul Brown, Don Coram, Marsha Looper, Ray Scott, Glenn Vaad, Randy Baumgardner, and Jerry Sonnenberger.

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Which Republican will crater for carbon tax?

February 8, 2012 by Amy · Comments Off
Filed under: CDPHE, HB 1365, New Energy Economy 

A bill to repeal Colorado’s “phantom carbon tax” was heard today in the Republican-controlled House Agriculture, Livestock, and Natural Resources Committee. It’s the second time in as many years that State Representative Spencer Swalm (R-Centennial) has sponsored the pro-ratepayer legislation. Both times it was heard in the House Ag Committee. Last year, we documented how some Republicans in the committee voted to keep the carbon tax in tact, which is de facto support for the theory of man-made global warming.

The usual suspects, including Xcel Energy, the Colorado Department of Public Health and Environment (CDPHE), and the Public Utilities Commission (PUC), lined up against relief for ratepayers this year.

Fortunately for ratepayers, the Independence Institute stood by their side and against corporate welfare. As I stated in my testimony in support of HB 1172:

It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes.

The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders. (Full testimony is below)

Conventional political wisdom suggests that most Democrats would support carbon taxes while most Republicans would oppose them, especially in an election year, and that a party-line vote would have moved this bill out of committee. But after close to two hours of testimony, no vote was taken. Vice-Chairman Randy Baumgardner laid over HB 1172 until a later date. Colorado ratepayers will have to wait a little longer to see which lawmakers have the courage to provide relief from needlessly high electric rates.

Two members of the committee were absent from today’s hearing, Republican Chair Jerry Sonnenberg and Democrat Wes McKinley, which didn’t shift the balance of power. The bill still should have moved out of committee on a 6-5 vote, unless someone doesn’t want this bill to go to the floor of the House for an open debate.

So the real question is how will the House Ag Committee vote on HB 1172? Will some Republicans turn their backs on ratepayers and throw their support behind carbon taxes, the theory of man-made global warming, and corporate subsidies as they did last year? And if some do, which ones?

Republicans members of the House Agriculture, Livestock, and Natural Resources Committee:

  • Jerry Sonnenberg, Chair
  • Randy Baumgardner, Vice-Chair
  • J. Paul Brown
  • Don Coram
  • Marsha Looper
  • Ray Scott
  • Glenn Vaad

Democrat members include:

  • Randy Fischer
  • Matt Jones
  • Wes McKinley
  • Su Ryden
  • Edward Vigil
  • Roger Wilson

Any guesses on how the vote will go?

Testimony on behalf of

HB 1172 No Imputed Carbon Tax

February 8, 2012

House Agriculture, Livestock and Natural Resource Committee

Mr. Chairman and Members of the Committee:

My name is Amy Oliver Cooke. I write on and direct the energy policy center for the Independence Institute, 727 E. 16th Ave, Denver, CO 80203

Thank you for allowing me the opportunity to testify today on behalf of HB 1172.

At the Independence Institute, we are agnostic on energy resources. It is our strong belief that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups.

HB 1172 is simple in nature, unless a carbon tax is passed at the federal level, ratepayers should not be disadvantaged financially by paying the phantom carbon tax to an Investor Owned Utility such as Xcel Energy.

History

We haven’t been able to find any other state that has a carbon tax in statute. Colorado’s is based in HB08-1164, which says the Public Utilities Commission:

may give consideration to the likelihood of new environmental regulation and the risk of higher future costs associated with the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.

HB 1172 would change the wording ever so slightly to the PUC

may give consideration to the existence of new environmental regulation and the costs imposed by current federal law or regulation on the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.

When the 2008 bill passed, Colorado Conservation Voters explained it HB 1164 this way:

By giving the PUC the ability to use carbon as a value in resource planning decisions, HB 1164 represented the first time that the Colorado General Assembly took a substantive step forwards in giving regulators the tools they need to explicitly address global warming.

Three current members of this committee (Reps. Sonnenberg, Vaad, and Looper)  voted against that bill in 2008. I commend them for doing so. It is a selective, regressive tax – selective on resource (coal) and selective on customers (IOUs such as Xcel Energy), although pass through costs affect almost everyone in the state.

To tax or not to tax?

While it’s prudent for the PUC to consider the risks of Congress passing a cap-and-trade scheme that would put a price on carbon, it is, in equal measure, rash to include the cost of a federal carbon tax in resource planning that covers a time frame in which these costs don’t exist.

To its credit, the PUC staff registered second thoughts about the application of a carbon tax. Alluding to the $20 ton carbon tax during hearings for Xcel’s 2010 renewable energy compliance plan, PUC staff witness William Dalton expressed concern about “including costs that do not exist.”

Even Xcel Energy doesn’t believe that a carbon tax will be passed at the federal level any time soon.

As early as June 2010, Xcel petitioned the PUC for permission to renege on a commitment to build a 250 megawatt solar thermal power plant due to “changed circumstances,” among which the utility cited “the expectation that carbon legislation won’t be enacted for several years,” which would, “erode the economics of solar thermal” [Direct Testimony James F Hill, Xcel Witness, 4 June 2010, Docket 10A-377E]

In the 2012 Renewable Energy Compliance Plan, In Section 7 — Retail Rate Impact and Budget, Xcel acknowledges that I was correct in February 2011 when I testified in front of this committee on HB 1240, there would be no national carbon tax in the near future:

The carbon assumptions approved by the Commission in Docket No. 07A-447E assumed carbon regulation would be enacted in 2010; such regulation was not enacted and the prospects for near term carbon regulation appear to be slim.

Because Xcel assumes there will be no carbon tax in the near future, it presents a cost model that excludes the carbon tax and another model that does include the tax but not until 2014:

Due to the uncertainties related to the timing associated with possible carbon emission regulation, the Company did not include any carbon cost imputations in the model runs and other calculations set forth on Table 7-3. However, as discussed later, Public Service also presents with this Compliance Plan, as Table 7-4, a sensitivity case that assumes the same carbon imputation costs ($20 per ton, escalating at 7% annually) as approved in the 2007 Colorado Resource Plan but on a delayed implementation schedule of 2014.

The cost differences are substantial.

Colorado Legislative Council Staff wrote in the fiscal note for HB 1164, “the bill will not affect state or local revenue or expenditures, and is assessed as having no fiscal impact.” But including a non-existent $20 per ton carbon tax that adds millions of dollars to the cost of otherwise inexpensive fuels such as coal, has an impact on ratepayers. Currently, according to DOE statistics Colorado has the highest electric costs of any neighboring state, second highest in the Rocky Mountain West.

Conclusion

It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes. The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders.

If the state legislature wants to tax Coloradans to pay for global warming, they should make their case to voters  — all voters – and not just penalize Xcel Energy ratepayers, who have no other place to go, no recourse.

As I stated at the beginning it is the strong belief of the Independence Institute that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups and we believe that HB 1172 is consistent with that principle.

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PUC “quasi-legislative”?

January 26, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365 

In testimony before the House Transportation Committee for his bill HB12-1016 (detailed earlier) on January 25, Rep. David Balmer stated that he considered introducing a bill that would strip the Public Utilities Commission (PUC) of any legislative authority.

Since the PUC apparently has “quasi-legislative” powers and “quasi-judicial” power, shouldn’t PUC commissioners be elected so that the people of Colorado have a say in the direction of utility, transportation, and telecommunications policy?

Balmer’s bill, which would have required more transparency in the PUC, was postponed indefinitely. Two legislators Representatives Glenn Vaad and Marsha Looper supported additional transparency.

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Questions about Baker’s ability to serve on the PUC

January 25, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

Conventional wisdom in energy policy circles says that Governor John Hickenlooper will re-appoint current Public Utilities Commissioner Matt Baker to another four-year term on the PUC. His State Senate confirmation will be a mere formality, but it shouldn’t be.

Serious questions linger about his lack of honesty regarding energy costs and his ability to be an independent regulator.

Rather than regulate Colorado’s investor-owned utilities, the environmental activist-turned-regulator Baker is more interested in advancing his green energy agenda to the detriment of Colorado ratepayers. He and former PUC Chairman Ron Binz (whose own re-appointment was derailed with an ethics violation after which he withdrew his name for consideration) were instrumental in negotiating the language of HB 1365, a senseless fuel-switching bill and the “crown jewel” of Bill Ritter’s New Energy Economy that will cost ratepayers more than $1 billion.

After a stint at Colorado Public Interest Research Group (CoPIRG), Baker subsequently helmed the advocacy group Environment Colorado from 2003 until his elevation by Ritter to the PUC in 2008. During his tenure he led the campaign for 2004’s Amendment 37 requiring utilities to implement renewable energy standards. Ritter lauded the “architect” of the – now – 30 percent renewable energy standard as a “champion of Colorado’s environment and consumer rights.”

But Baker’s love affair with renewable energy prevents him from being objective about Colorado energy policy and thus not honest with the people he is charged with serving – eroding consumer rights and driving up energy costs with regulatory sleight of hand.

In a recent op-ed in RenewablesBiz.com, Baker gushes over the advancement of his green agenda. He repeats one the biggest renewable falsehoods green activists have perpetuated on Colorado ratepayers: Colorado’s largest utility Xcel Energy can acquire 30 percent of its power from expensive renewable sources while keeping a cap on electric rates.

Most ratepayers believe that means that the renewable energy mandate – energy from sources such as wind and solar – will only cost them an additional two percent on their electric bill. “While Colorado’s largest utility, Xcel Energy, has exceeded its goals, it has stayed within the 2 percent cap set by the legislature,” says Baker.

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 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. At best Baker is being disingenuous with Colorado ratepayers. At worst, he is flat out lying about the real costs of renewable energy in order to advance his own personal agenda.

Matt Baker’s re-appointment and confirmation should not be a rubber stamp. Colorado ratepayers deserve better.

Amy Oliver Cooke and Michael Sandoval co-authored this post.

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Energy in 2012 GA: Legislators address HB 1365, tiered rates and the PUC

January 22, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

Two years after the passage of the fuel-switching bill HB 1365, Governor Bill Ritter’s “crown jewel” of the new energy economy, supporters would like the debate to go away. But like a nagging cough, it just won’t.

Several bills in the 2012 legislative session address issues raised surrounding the collusion to draft HB 1365, the cost recovery, and the role of the Public Utilities Commission (PUC).

Also legislators want the PUC to provide an annual report to the General Assembly and to prohibit tiered rates as a way to reduce monthly electric consumption.

Bill Summaries

HB12-1016 PUC Ex Parte Communications

House Sponsors: David Balmer (R-HD 39)

Senate Sponsors: None

This bill addresses conflicts of interest such as those that occurred with HB 1365 when PUC commissioners helped draft the language of the bill and then sat in judgment of it.  In November 2010, William Yeatman reported that several Colorado State Senators sent a letter to Governor Bill Ritter asking him to remove then Commissioner Ron Binz and Commissioner Matt Baker from deliberations on HB 1365.

The Colorado Mining Association (CMA) also requested that Binz and Baker recuse themselves because of the obvious conflict of interest but both men refused.  A disappointed CMA president Stuart Sanderson told the Denver Post:

[that he’s] not at all surprised by the ruling, which was made by the same commissioners who engaged in the back-room negotiations that led to both the enactment of (the clean-air act) and the plan to switch the Front Range generating stations from affordable coal to higher-cost natural gas.

William suggested in 2010 that this issue should be taken up by the General Assembly:

Of course, it is inappropriate for the PUC to be writing legislation in cahoots with the utility that it regulated, but that’s an issue for the State Legislature. More precisely, why did the General Assembly pass a law written in large part by a utility? That’s where the system failed.

With HB12-1016, it appears the General Assembly will at least have a conversation about it. According to the fiscal note:

The bill modifies the operations of the Public Utilities Commission  (PUC) in several ways. It specifies that the Colorado Code of Judicial Conduct applies to PUC commissioners and administrative laww judges (ALJ). It requires ex parte communication memoranda (private communications between a PUC commissioner or ALJ and an interested person) to be posted on the PUC website within five business days after it is filed. The records of communications between two or more commissioners concerning pending legislative proposals are made subject to disclosure in accordance with the “Colorado Open Records Act.”

When a party to a proceeding before the PUC has a good-faith belief that a commissioner or ALJ may not be impartial or has engaged in a prohibited communication, the party my file a motion to disqualify the commissioner of ALJ from the hearing. The PUC must immediately suspend the proceeding and rule upon the motion within ten business days. If the motion for disqualification is approved, and this results in the loss of a quorum, the decision rendered by a commissioner designated as a hearing officer or the ALJ is the final decision of the PUC.  Any appeal of this final decision may be taken directly to district court rather than be reconsidered by the PUC.

In other words, communication must be made public and the PUC can’t be the court of last resort.

HB12-1102 Cap Clean Air/Clean Jobs Electricity Rate Impact

House Sponsors: Spencer Swalm (R-HD 37), Balmer, Chris Holbert (R-HD 44), John Soper (D-HD 34)

Senate Sponsors: Lois Tochtrop (D-SD 24)

This bill caps requires the PUC “to establish a maximum retail rate impact of 1 percent of the annual total base rate electric bill for each customer” for the cost recovery of HB 1365.

The interesting part about this bill is its bi-partisan support in the House and an electric ratepayer advocate sponsor democrat Lois Tochtrop in the Senate.

Prediction: Leadership in both the House and Senate will provide cover for Xcel and environmentalists as they did last year. This won’t pass; too many special interest groups have too much invested.

HB12-1121 PUC Hearings Utilities Ratepayers’ Bill of Rights

House Sponsors: Ray Scott  (R-HD 54)

Senate Sponsors: None

This bill declares that the interests of ratepayers are not recognized at Public Utilities Commission (PUC) proceedings, therefore:

  • Investor Owned Utilities (IOU), such as Xcel Energy, must consider the interests of ratepayers as well those of shareholders.
  • The PUC must “require” IOUs to focus on the needs of consumers including “providing reasonable rates, improved customer service, and fair treatment.”
  • “Transparent and understandable” rate increase information including “using advanced-information processing capabilities” to estimate the cost to specific consumers rather than the hypothetical consumer average.
  • IOUs cannot pass along to ratepayers the cost of research and development.
  • IOUs cannot pass along to ratepayers the cost of complying with environmental regulations that have not been enacted by the federal government.
  • IOUs cannot pass along to ratepayers the cost of legal fees associated with pursuing rate increases.
  • PUC must protect ratepayers by adhering to a least cost principle for energy rates.

The bill does a couple of good things including forcing Xcel and the PUC to acknowledge how much energy policies will cost actual consumers rather than the nebulous “average ratepayer.” Also, it will prohibit Xcel from collecting costs of imposing regulations such as the “phantom carbon tax” that aren’t actual federal environmental regulations. We’ve written about the insidiousness of the carbon tax in detail here and here.

Prediction: Xcel, natural gas, House leadership, and new energy economy advocates will oppose HB 1121. Therefore, it won’t get out of the House Ag Committee, but we hope we are wrong.

HB12-1123 PUC Report to the General Assembly on Rate Case Hearings

House Sponsors: Kathleen Conti (R-HD 38), Jon Becker (R-HD 63), Paul Brown (R-HD 59), Brian DelGrosso (R-HD 51), Holbert, Carole Murray (R-HD 45), BJ Nikkel (R-HD 49), Robert Ramirez (R-HD 29), Scott, Ken Summers (R-HD 22), Swalm, and Libby Szabo (R-HD 27).

Senate Sponsors: None

This bill requires the Director of the PUC or his designee to report annually to the joint House and Senate transportation committee regarding public information on rate cases decided by the PUC during the previous two years. Also to be included in the report, the economic impact on ratepayers.

Prediction: It will pass the House because it has good support from Republicans including leadership with Rep Nikkel, House Majority Whip, as a co-sponsor. The Senate will be more interesting because the green-at-all-cost lobby enjoys a majority and doesn’t want anyone questioning the PUC about costs of the new energy economy. The debate will be transparency versus environmentalists. Leaning toward enviros but being an election year, anything could happen.

HB12-1172 Electric Rates in Connection with Greenhouse Gas Emissions

House Sponsors: Swalm and Conti

Senate Sponsors: None

This bill does two things. First, it prohibits the “phantom carbon tax” unless imposed at the federal level.

The enabling legislation passed in 2008 despite overwhelming Republicans opposition. Fast forward to 2011, the first time that Rep Swalm tried to repeal Colorado’s $20 per ton carbon tax, and some Republicans now embrace a carbon tax as we exposed when covering the vote on Swalm’s HB 1240.

Second, the bill prohibits an IOU from imposing tiered rates based on monthly consumption.

Tiered rates are anti-family and anti-consumer. With Xcel asking for an interim rate increase due to TOO MUCH energy and not enough demand, tiered rates are also hypocritical as I wrote several days ago.

Prediction: This bill is too pro-consumer, pro-ratepayer to pass. The HB 1365 lobby likes the carbon tax and Xcel Energy. Both will make sure it gets killed.

Several Final Points

After last year’s legislative session, we said that the unreported story of Colorado energy policy was that a few brave legislators had the courage to go on the offensive against anti-consumer energy policies. Judging from the bills above, this year will see more legislators joining the fight. We’ve written before that it is easy to get angry with special interest groups and Xcel Energy, but the responsibility really lies with elected officials and the PUC. It appears that some legislators have sensed the outrage and look to address problems we’ve been reporting for the last two years.

With his name on three of the five bills, Spencer Swalm emerges as the champion of Colorado ratepayers.  He stood up to leadership in his own party last year, and with more legislation this year Swalm proves he is willing to stand up again on behalf of ratepayers who have no voice in the new energy economy. Representatives Kathleen Conti and David Balmer get honorable mention.

What’s missing from the 2012 legislative session? A discussion over whether or not the PUC should be elected or appointed. Rep Conti introduced legislation last year that was killed in the House transportation commission. Based on how the PUC commissioners have politicized themselves by crafting legislation rather than sitting as objective regulators, it might be time for Colorado voters to determine the direction of the PUC.

Check back to the energy policy blog. We’ll keep track of these bills so you don’t have to.

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Cozy relationship between Xcel and PUC?

January 12, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

In a surprising move to anyone who has watched the cozy relationship develop between Xcel Energy and the Public Utilities Commission, yesterday the PUC denied Xcel’s $142 million interim rate request.

Colorado News Agency columnist Peter Blake (then with Face the State) initially exposed how the PUC, Xcel, and Governor Ritter’s administration colluded on the cost recovery language of HB 1365, the infamous fuel switching bill, which allows for Xcel to ask for an interim rate increase without a public hearing. Emails from then PUC Chairman Ron Binz shows just how deeply involved the PUC was with Xcel, the very company the PUC is suppose to regulate:

  • March 8, 2010: “We will agree to using the extraordinary cost recovery in proportion to pressure that the approved plan puts on the company’s financial health.”
  • March 9, 2010: “The Commission and Xcel have agreed on language for cost recovery.”
  • March 11, 2010: “I was working with Karen Hyde up until 9:00 last evening to hammer out the final language in a couple of areas.”

Karen Hyde is Xcel’s vice president for rates and regulatory affairs for Colorado. After yesterday’s decision, she told the Denver Post, “we are very disappointed. We outlined what the negative impact would be as of Jan. 1. We are sorry the commission didn’t recognize the adverse impact of the delay.”

Based on the emails above, Xcel is probably more than “disappointed.” It’s a little like being kicked in the stomach by your new best friend. But since the heady days of the HB 1365 love fest, Ron Binz has left the commission under the cloud of an ethics investigation, which found him guilty of violating the constitution for accepting a privately paid trip without legitimate state purpose from an industry that he was charged with regulating and actually benefitted from HB 1365.

Yesterday’s decision doesn’t mean ratepayers are off the hook. It just means a reprieve until full public hearings are conducted. If the PUC eventually grants the full rate increase, more than a third of which is due to Xcel’s poor management, then we’ll know the PUC and Xcel still are best friends.

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Finally some outrage over the New Energy Economy

December 30, 2011 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

I may have underestimated the outrage over two recent Xcel Energy rate increase requests.

The first, an attempt to recover the final $16.5 million in cost for Boulder’s Smart Grid City program. Ratepayers are not thrilled about paying for a Boulder project with massive cost overruns.

Check out these comments:

From Phil Carson, editor of the online energy resource Intelligent Utility:

Investor-owned utilities will do whatever they can to pass costs along to the ratepayer, no matter whether those costs are the result of bad decisions, cost overruns or faulty execution. And public utility commissions merely aid and abet this abuse of customers of regulated monopolies by rubber stamping this outrage.

A strong statement, perhaps? I wouldn’t rush to reject it. For one thing, it isn’t mine. It is the precise upshot of statements by dozens and dozens of ratepayers in Colorado in general and Boulder in particular over Xcel Energy’s attempt to recoup another $16.6 million on its SmartGridCity outlays, after succeeding in recovering $27.9 million earlier this year.

Email comments to the Public Utilities Commissions (thanks to Phil for providing the link) share that sentiment:

Mr. William Newell

As I recall the residents of Boulder wanted the smart grid. There was discussion about who would pay for this in 08. Now Excel wants all of the state consumers to pay for Boulders [sic] desire. Boulder Excel [sic] customers alone should pay for the cost of the smart grid. Our rates have already increased much higher than the inflation rate due to government regulations.

Gladys Rey Mendez

Subject: Cash Cow=Customer

When will utilities, both private and public, and their respective regulators, take responsibility for the cost over-runs of projects undertaken…Now the utility want to rate-base the balance of the cost of an experiment and collect from customers who have no association with the experiment. At the end of the day customer costs do not go down. Any real energy saving or efficiencies which dilute revenues and returns, the utilities are right back before regulators proposing rate increases….

Ms. Mendez is onto something. If ratepayers become conscientious energy consumers and use less electricity, then why does the utility come before the PUC looking for another rate increase?

Take Xcel Energy’s requested $142 million rate increase. Nearly 37 percent of that rate increase, $53 million, is to pay for excess capacity that Xcel no longer sells wholesale to Black Hills Energy, resulting in increased costs for both utilities that they pass along to ratepayers. The Denver Post’s Mark Jaffe explains:

In 2004, Xcel, with 1.3 million Colorado customers, told Black Hills it would not extend the contract and would use the 300 megawatts of generation for its own service area.

Black Hills, which serves 93,300 electric customers in southeastern Colorado, built two gas-fired power plants in Pueblo to fill the gap and got a $23 million rate hike — which takes effect Jan. 1 — from the PUC to recoup the costs.

But it turns out Xcel has excess generating capacity and doesn’t need the 300 megawatts at this time.

As part of its $142 million rate request, Xcel is asking for $53 million to cover the carrying costs of the excess capacity.

Jaffe also quotes Xcel’s Karen Hyde who blames the recession for “damped demand.” But I suspect that some of Xcel’s own policies also “damped demand.”

How about tiered rates? How about Xcel Energy’s own conservation program Responsible By Nature, which enjoys a massive marketing campaign, that encourages decreased electric usage and provides information about rebates for energy saving appliances (for which ratepayers also pay)?

Isn’t less energy usage exactly what everyone — the PUC, Xcel Energy, the environmentalists — wanted? Now they get it, and ratepayers are punished.

Customers, including businesses and consumer advocacy groups, are lining up in opposition to the latest rate increase. The money quote comes from Wal-Mart Stores, Inc., which also submitted comments against Xcel’s rate increase.

An affidavit from Steve Chriss, the Senior Manager of Energy Regulatory Analysis for the Bentonville, Arkansas based corporation questioned why the PUC would grant a $100 million plus rate increase without thorough public vetting process.

Chriss also addresses the gigantic electric elephant in the living room. Why is Xcel “guaranteed” a 10.5 percent rate of return:

6. PSCo claims that the interim rate relief is necessary because in 2010 that Company earned “only” a 10.23 percent return on equity during 2010, which is below their current authorized return on equity of 10.5 percent.

7. To the extent that PSCo claims that its financial circumstances are exigent the Commission should consider that according to the Edison Electric Institute, the average return on equity awarded in 2010 by utility regulatory commission was 10.29 and for the first three quarters of 2011, the average return on equity awarded was 10.24….

8. Additionally, the Commission should consider that ratemaking principles do not guarantee the Company’s approved rate of return. Instead, rates are set in such a way that the Company has the opportunity, but not a guarantee, to earn their approved rate of return.

HB 1365 allows for it. Colo. Rev. Stat. § 40-3.2-207 (3) reads:

Current recovery shall be allowed on construction work in progress at the utility’s weighted average cost of capital, including its most recently authorized rate of return on equity, for expenditures on projects associated with the plan during the construction, startup, and preservice implementation phases of the projects.

As William Yeatman and I pointed out in our paper exposing the collusion between Xcel, the PUC, and former Governor Bill Ritter’s office, the current rate of return is 10.5 percent. Anything to do with implementing it (and that’s pretty much everything) is subject to the same rate of return.

The PUC may give lip service to caring about ratepayers, but the commissioners, Gov. Ritter, and a majority of state legislators, made a deal with the devil. As we wrote in October 2010:

As mentioned earlier, the Ritter administration led negotiations for the fuel- switching bill, but the PUC was also a willing participant in brokering a deal to assure Xcel’s cooperation. Peter Blake, writer for the popular Colorado politics blog Face the State, exposed the collusion:

Binz was trading flurries of e-mails on the pending bill with Ritter aide Kelly Nordini, natural gas lawyer Russell Rowe, and Xcel executives Karen Hyde, Roy Palmer and Paula Connelly. Xcel, seeking immediate and complete cost recovery for their capital costs, wanted to be sure the PUC would support that.

Even more damaging revelations come from Binz’s emails from earlier this year:

  • March 8: “We will agree to using the extraordinary cost recovery in proportion to pressure that the approved plan puts on the company’s financial health.”
  • March 9: “The Commission and Xcel have agreed on language for cost recovery.”
  • March 11: “I was working with Karen Hyde up until 9:00 last evening to hammer out the final language in a couple of areas.”

Blake noted the bill “was introduced four days later and rushed through the legislature in a couple of weeks.” Denver Post columnist Vincent Carroll makes the same case for collusion: “As early as last December [2009],” two PUC Commissioners Baker and Binz, “had talked with natural gas interests about possible legislation and have been touting it since.”

Earlier this year, PUC Chairman Ron Binz withdrew his name for consideration of a second four-year term in the wake of an ethics investigation over questionable travel expenditures.

Xcel likely will get what it wants on the Smart Grid project because it already settled with the PUC on cost back in 2009. As for the rate increase, the PUC and the state legislators who have enabled Xcel walk a fine line. Xcel likely will get most of what it wants because it has lobbyists and ratepayers don’t.

While I’m grateful that there is some outrage over these latest rate increases, I can’t help but wonder why now when HB 1365 will cost ratepayers more than a $1 billion, the State Implementation Plan another $100 million, and this year renewable energy mandates add another $100 million plus.

The New Energy Economy is a very expensive economy. It’s about time ratepayers realized it.

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Florida’s ‘fuel mix’ a warning to Colorado

October 7, 2011 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

Florida has higher electric rates than those of neighboring states because of its reliance on natural gas to generate electric power according to a study released in September.

In a September 27, 2011, press release the Florida Public Service Commission (PSC) said it requested the study from the Public Utility Research Center (PURC) located at the University of Florida’s Warrington College of Business “as part of an initiative to find ways to hold down utility rates.”

Two key findings from the study titled “Addressing the Level of Florida’s Electricity Prices”:

  • From 1990 through 2002, Florida’s electricity costs were comparable to the other states’ costs. Beginning in 2003, the residential cost of electricity in Florida grew faster than costs in the other states and is now about 10% higher than the next highest state, Alabama.
  • Overall, it appears that Florida’s electricity costs appear high relative to those of neighboring states because Florida uses more natural gas to generate electricity than do the other states.

In 1990, Florida got roughly 60 percent of its electricity from uranium and coal, and is down to 40 percent today. The decline is offset by an increased reliance on natural gas, which by 2009 accounted for 50 percent of the state’s electricity.  ”In contrast, the neighboring states of Alabama and Georgia generated 66 percent and 78 percent, respectively, from coal and nuclear energy.”

PSC Chairman Art Graham responded to the study and Florida’s fuel mix:

‘It comes with a cost—Florida’s residential customers pay 10 to 20 percent more than they would in other Southeast states.  Documenting the reason for higher prices is an important first step in restraining rates.’  He cautioned that cost is just one factor to consider in fuel diversity decisions, however.

Coloradans would be wise to keep an eye on Florida because with HB 1365, the fuel switching bill, we are headed in the same direction.

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Obama decision also a rebuke of Ritter admin

September 6, 2011 by Amy · Comments Off
Filed under: Archive, CDPHE, HB 1365, New Energy Economy 

President Barack Obama put a halt to the Environmental Protection Agency’s (EPA) proposed air-quality standards just before the Labor Day weekend.  The Wall Street Journal opined that the president cited the struggling economy as his main reason for not wanting to tighten ozone regulations at this time:

Come January 2010, the Obama EPA said it wanted to lower the ozone standard more, to between 0.060 and O.070 ppm. Problem is, this would have put 85% of monitored U.S. counties (628 out of 736) into “non-attainment” status. And the problem with that is that under current law, non-compliance effectively forces many utilities, businesses and agricultural operations in those counties to shelve expansion plans.

Translation: no new jobs.

WSJ called the president’s decision a “rebuke” of EPA Administrator Lisa Jackson:

whose decision to tighten the standard was based on an advisory-board recommendation that the Bush administration had rejected. In a statement, Ms. Jackson said the agency would “revisit the ozone standard,” but she pointedly stopped short of endorsing the president’s decision.

But the president’s decision is also be a rebuke of Governor Bill Ritter, Colorado lawmakers on both sides of the aisle, environmental special interest groups, the Colorado Department of Public Health and Environment, Xcel Energy,  Public Utilities Commission and  industry that all employed the EPA regulation scare tactic as a reason to pass HB 1365, the fuel switching bill, and HB 1291, the State Implementation Plan (SIP). And this isn’t the first time that the federal government has blown the justification that Colorado lawmakers used to ram through the disastrous energy legislation.

Energy policy analyst William Yeatman of the Competitive Enterprise Institute and contributor to this blog, pulled no punches in this exclusive interview on the Amy Oliver Show on News Talk 1310 KFKA. Yeatman says lawmakers got duped. Obama cites economic reality of the job killing regulations while Colorado lawmakers and the CDHPE cite the bogus excuse of “reasonably foreseeable” air-quality standards that never materialized. Other points from the Yeatman interview:

  • The PUC cited bogus deadlines due to “reasonably foreseeable” regulations and compressed the “accelerated Electric Resource Plan” from 18 to 30 months into 3 months.
  • Rush was also to ensure Ritter’s environmental legacy
  • The “big lie” was “obvious” and not the first for CDPHE
  • Xcel ratepayers are the big losers because they will pay $1 billion for an unnecessary energy plans.
  • Ritter won’t be hurt by any of this because he isn’t “encumbered by the truth.”

Basically Colorado lawmakers bought into these phony deadlines and threats of EPA usurping state authority, while Xcel ratepayers got stuck with bill. We’d like to say we enjoy the annoying chorus of “we told you so, we told you so!” But vindication is bittersweet because some of us are Xcel ratepayers.

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State Senator cites our work as a reason for PUC audit

June 23, 2011 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

State Senator Scott Renfroe (R-Greeley) said in an interview on the Amy Oliver Show on 1310 KFKA that information we published was influential in his decision to request an audit of the Colorado Public Utilities Commission.

Specifically Senator Renfroe cited:

Senator Steve King (R-Grand Junction) joined Senator Renfroe in the audit request. Both lawmakers are members of the politically-balanced Legislative Audit Committee.

According to the Colorado News Agency:

A formal request made earlier this year…asked the state auditor to conduct preliminary research into the activities of the PUC.  The findings of the state auditor will be used for the committee to make a determination as to whether a full audit is merited.

The letter outlines areas for evaluation including transparency, accountability to ratepayers, expenditures, the conduct of PUC members, and whether the commission is indeed living up to its role and mission as a watchdog for consumers.

Senator Renfroe said in the radio interview that the committee will get the “30,000 foot” report from the State Auditors Office at the next committee meeting on July 12 and 13. That report should contain a recommendation either for or against a more comprehensive audit of the embattled agency. Renfroe commented that he cannot predict what the report will say, but with all the questionable issues surrounding the PUC, he would be surprised if the recommendation was against a full audit.  The committee then votes on the recommendation.

We’ve long thought that PUC reform is overdue and accused the commissioners of “gross dereliction of duty.” Hopefully this audit will be a first step in a direction more friendly to consumers and less cozy with industry, elected officials and special interests.

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