The Colorado News Agency reported a gem of a quote from State Representative Randy Fischer (D-Fort Collins). While providing arguments against Representative Kathleen Conti’s (R-Littleton) bill to bring more accountability to the Public Utilities Commission, especially in the area of utility rate increases, Fischer:
The incremental costs are listed on consumers’ bills as the Renewable Energy Standard Adjustment (RESA). Since January 2009, the RESA charge has been set at 2 percent, the rate impact limit. For a consumer with a $150 Xcel bill, a 2% RESA charge would be $3 monthly, $36 annually.
Xcel defines the RESA on the monthly statements as representing “2% of an electric bill and funds the renewable energy program as required by Colorado law that asks utilities to generate increasing portions of their electricity from sun, wind and biomass.” Note with care that the Xcel statement does not say that the RESA covers the cost of renewable energy.
Incremental costs are only a small portion of the total costs of renewable energy that count towards RES compliance. The “non-incremental costs,” which are the total renewable energy costs minus the incremental costs, are recovered through a different monthly fee, the Electric Commodity Adjustment (ECA).
The Public Utility Commission staff’s William Dalton acknowledged confusion over the two fees as he explained the cost-shifting technique in testimony given to the Commission regarding the Public Service Company’s RES compliance plan in September 2009:
This could be a point of confusion to ratepayers and other interested parties: The [Public Service] Company is not exceeding the Renewable Energy Standard at the 2 percent retail rate impact that is borne by ratepayers. The costs above the retail rate impact limit are recovered through other Commission approved cost recovery mechanisms, primarily the ECA. 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 the Public Service Company’s 2010 RES Compliance Plan, the ECA is projected to be $6.3 million this year, before it balloons to $141 million in 2012. It then increases exponentially to $738 million in 2020, or almost 23 percent of total retail electricity sales—none of which would count against the 2 percent retail rate impact.
Assuming 1.5 million ratepayers in Colorado (current figure is 1.3 million) in 2020, and the mandated 20 percent renewable standard, the ECA cost alone will average nearly $500 per year per ratepayer.
The 2 percent rate cap does not apply to the preponderance of RES costs. And even where it does apply—to incremental costs—the price ceiling is evaded and exceeded.
Filed under: Archive, CDPHE, HB 1365, New Energy Economy
The Politics Colorado Blog today reports great news:
“Tuesday, Senate Republicans sent a letter to Senate President Shaffer asking Legislative Council to hold a public hearing to review the changes made to the State Implementation Plan (SIP) for implementing regulations for “regional haze”…
…”We think it’s important that Legislative Council hold a public hearing on this effort to give the General Assembly and public more time to consider the impact this plan will have on Colorado,” said Senator Scott Renfroe, R-Greeley.
“Serious questions and concerns have risen about the timing of the information and the data used in the plan,” concluded Renfroe.
As readers of this blog know well, I’ve long railed against the CDPHE’s manipulations of the regional haze rule. In short, the Department has used this regulation to push an anti-coal agenda.
Filed under: Archive, CDPHE, HB 1365, New Energy Economy
Usually, it takes about 18 months for the PUC to deliberate a major acquisition plan for new power plants. For HB 1365, however, the PUC decided on a $1.3 billion plan, affecting almost 1,000 megawatts of electricity generation, in only four months. According to the PUC staff (p 14), the truncated timeline shortchanged the vetting process, such that the cost and engineering analyses were “preliminary.”
To be sure, the PUC didn’t choose to rush; rather, the compressed timeline for HB 1365 deliberations was mandated by the legislation. HB 1365, which was enacted in April, 2010, gave the PUC until December 15 to finalize a plan. Xcel first pitched its preferred plan on August 13, so the PUC had four months.
Why the rush? The official reason, provided by Colorado Department of Public Health and Environment, was that the December deadline was a necessary evil in order to avoid a federal crackdown. Specifically, the CDPHE argued that the HB 1365 fuel switching plan had to be finalized by December, 2010, so that it could be incorporated into the state’s Regional Haze State Implementation Plan (SIP). According to the CDPHE, if the HB 1365 plan wasn’t completed by mid-December, then it would delay the submission of the Regional Haze SIP–due on January 9, 2011–which would lead to a federal takeover of the state’s air quality permitting.
The PUC finally issued a written ruling addressing appeals to its December decision on a HB 1365 implementation plan. As I noted here, virtually every stakeholder had requested a rehearing. The PUC issued an oral ruling on January 26, but I didn’t listen to it at the time, and media reports covered only the PUC’s rejection of coal interests’ appeals. So, until last night, I didn’t know how the PUC responded to rehearing requests from non-coal stakeholders, like Xcel.
Remember, HB 1365 allows the utility to walk away from the process for whatever reason, and thereby scuttle the legislation. In its appeal motion, Xcel used strong language to express its displeasure with the PUC’s decision regarding cost recovery. It even intimated that it would be willing to sink the process unless it got its way. Without going into too much detail, Xcel wanted to recover costs for “construction work in progress” (i.e., tearing down old power plants, building new ones, and installing pollution controls), as the work was performed, while the PUC insisted on a deferred cost recovery.
Cathy Proctor at the Denver Business Journal reports that the PUC on Wednesday denied appeals of its decision on HB 1365, the Clean Air Clean Jobs Act, legislation that effectively mandates fuel switching from coal to natural gas for almost 1,000 megawatts of electricity generation along the Front Range. As I explained here, virtually every party to this docket filed a motion to rehear the case.
The PUC has yet to post a written decision, and Proctor’s Denver Business Journal focuses on the coal stakeholders to the docket, so I don’t yet know if the PUC denied all appeals, or whether it only denied the coal companies’ motion.
Independence Institute president Jon Caldara tells Energy Now that out-going Governor Bill Ritter gets an “F” for energy policy.
Needless to say, that’s not the same grade Ritter would give himself. In the Governor’s interview with Energy Now, he touted his “fuel-switching” bill designed to kill the coal industry and the renewable energy mandate which forces Coloradans to pay more electricity so we can get power from windmills and solar panels.
Here’s a roundup of who argued what, along with links to the appeals:
- Xcel alleges that the PUC’s decision “fails to put into place one of the cornerstones” of HB 1365. This “cornerstone,” according to Xcel, entails faster rate recovery. The PUC decided that Xcel must wait until each rate case procedure (every 1 to 2 years) for cost recovery of construction work in progress; Xcel claims it is entitled to monthly payment. Legally, Xcel appears to be in the right: Part of HB 1365 awfulness is that it incents Xcel with extraordinary rate treatment. If the PUC holds firm, Xcel can appeal to a state court, or it could walk away from the Clean Air Clean Jobs Act (I’ve discussed that delightful possibility here).
- Gas Producers objected to the handling of highly confident information, like the long-term gas contract signed between Xcel and Anadarko (this contract is the putative hedge against Colorado’s increased reliance on the mercurial gas market). In particular, Gas Producers sought an amendment to the decision making it clear that the treatment of highly confidential information in the HB 1365 docket would not become precedential for future dockets.
- Independent Power Producers (“IPPs,” they are power generators that compete with Xcel on the wholesale electricity market) asked the PUC to amend its decision to establish rules that would skew the wholesale electricity market in the IPPs favor, at the expense of Xcel. As HB 1365 skewed the market to Xcel, the IPPs apparently are asking for a quid pro quo.
- HB 1365 is a bill written by special interests in order to exploit Colorado consumers, yet the feckless Office of the Consumer Counsel had only one complaint with the PUC’s decision (and, moreover, was a non-entity during the hearings). The OCC objected to the PUC’s decision to investigate the use of ratepayer funds to pay for the re-education of Colorado coal miners who lost their jobs because the Governor Bill Ritter picked winners in the energy industry.
- The most adversely affected parties (Peabody Energy, Coal Miners Association, and the Associated Governments of Northwest Colorado) filed similar appeals. All of them argued that the PUC violated their due process, and they are all correct, IMHO. The PUC seemed to be making up the rules as it went along. Over the weekend, I’m going to write a post about the PUC’s due process problems, but in the meantime, the breadth of the legal challenges described above is the most telling evidence that the PUC was unhinged from any legal moorings.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.
“I have a moderate proposal” was how PUC Chairman Ron Binz introduced his interpretation of cost recovery provisions in HB 1365, the Clean Air Clean Jobs Act, legislation that effectively mandates fuel switching from coal to natural gas for almost 1,000 megawatts of base-load electricity generation along the Front Range. It was a very important exegesis. One of the major reasons Xcel agreed to go along with fuel switching was the possibility of ultra-generous rate treatment accorded by the legislation. Yet the language of the law was ambiguous on certain key points, and the PUC was the final arbiter of what these words meant. Millions of dollars hung in the balance.
Chairman Binz pitched his proposal on December 9, during the PUC’s final deliberations on HB 1365, and he was true to his word when he labeled it “moderate.” The PUC Chairman denied many of Xcel’s demands—most significantly, the utility’s insistence on upfront payment, without having to submit to a cumbersome and time-consuming rate case procedure.
Although I disagree with PUC regulation of the electricity industry to begin with (for my take on this matter, click here or here), I don’t think Chairman Binz’s proposed cost recovery regime (which ultimately was adopted by the PUC) is unreasonable. I do, however, disagree with Chairman Binz’s statement that he did “not think highlighting this [HB 1365 costs] on a bill will serve us well.”
Perhaps Chairman Binz was worried about his legacy and was therefore loathe to allow a monthly reminder to more than a million Coloradans of the costs of legislation he helped write. Governor Bill Ritter, too, would be poorly served by a constant reminder that his “New Energy Economy” came with big strings attached.
- Regarding HB 1365 (a.k.a. the Clean Air Clean Jobs Act), the big news is that Xcel has yet to make up its mind. As I noted here, the Minneapolis-based utility has the authority under HB 1365 to veto the fuel switching implementation plan chosen by the PUC on December 10. So far, Xcel has kept mum on its intentions, save for a request to clarify the PUC’s written decision. In particular, the utility asked the PUC what sort of flexibility it has in scheduling the retirement of the 152 megawatt Cherokee 3 coal fired power plant in Adams County north of Denver. If Xcel were to veto the PUC’s preferred plan, then HB 1365 and its attendant proceedings would have been for naught.
- At the conclusion of HB 1365 hearings before the PUC, I predicted confidently that coal interests would litigate whatever was decided. As well they should: HB 1365 was proposed by coal’s competitors, in order to tilt the electricity market away from coal, and towards themselves. In light of the fact that coal’s competitors chose to compete in the legal arena, rather than the market, coal interests in Colorado have every right to defend themselves using the legal process. Here’s a litigation roundup.