How CEI and II Toppled EPA Region 8 Administrator James Martin

March 14, 2013 by Amy · Comments Off
Filed under: Archive 

By William Yeatman

In mid-February, EPA Region 8 Administrator James Martin—who previously had served in the Ritter administration as the key facilitator of the Clean Air Clean Jobs Act—announced his resignation. The announcement came as a surprise, as Martin’s tenure at EPA was unusually brief. In fact, only one other (of 9) EPA Regional Administrators served a shorter term during the Obama administration. That was EPA Region 6 Administrator Al Armendariz, who quit after infamously comparing his enforcement strategy to a “crucifixion.”  Martin served about 1 month longer than the disgraced Armendariz.

Martin cited “personal reasons” as the cause of his departure, but the truth is that he left amidst a storm of controversy. Only two weeks before his resignation, Martin was caught lying before a federal court about the extent to which he used his private email accounts to conduct official EPA business. Fibbing to a federal court is a much more likely explanation than “personal reasons” for Martin’s abrupt departure.

The lawsuit that led to Martin’s mendacity was filed by the Competitive Enterprise Institute. And CEI’s lawsuit, in turn, was based on records from a Colorado Open Records Act obtained by the Independence Institute. The upshot is that the two organizations likely toppled an EPA Regional Administrator. In light of Martin’s history of using public office (first in the Ritter administration, then in the EPA) to wage a war on affordable energy, the Independence Institute and CEI have performed a public service. This blog post explains how we did it.

It all began in the fall of 2010. At the time, Colorado state regulators were implementing the Clean Air Clean Jobs Act (CACJA), legislation requiring that Xcel Energy switch almost 1,000 megawatts of electricity generation from coal to natural gas. On this blog, Amy and I were posting regularly on the folly of the CACJA (see here, here, here, and here). In that capacity, we attracted the attention of the Colorado Mining Association, which was also opposed to the CACJA, for obvious reasons. The Mining Association had performed a Colorado Open Records Act request for all Ritter administration correspondence pertaining to the development of the CACJA. In return, the Mining Association received a huge tranche of almost 3,000 emails, which were provided to us.

The emails demonstrate that James Martin, who was head of the Colorado Department of Public Health and Environment when the Ritter administration pushed the CACJA through the General Assembly, was a central player in the development of the fuel switching plan.

Yet the emails also expose the fact that Martin worked exclusively from non-official email accounts while serving in the Ritter administration. Whereas every other state official involved in CACJA deliberations sent emails from a government email account (ending in “@state.co.us”), Martin  used three different “@gmail.com” accounts.

At the time, I made a mental note of Martin’s unique use of private email for public business, but I didn’t think anything more of it…

…Until last summer.

A colleague of mine at the Competitive Enterprise Institute, Chris Horner, is one of the foremost transparency experts in the country. He literally wrote the book on the Freedom of Information Act (FOIA). While researching that book last summer, he came across mounting evidence that Obama administration officials are using private email accounts to conduct official business, in an effort to circumvent public scrutiny.

His concerns prompted my memory of Martin’s practice of using his gmail accounts. So we filed a FOIA request with EPA, asking for all email correspondence about policy between Martin and the professional greens at Boulder-based Environmental Defense. We limited the search to email traffic to and from Environmental Defense because Martin had spent ten years there as a litigator before joining Ritter’s team. Also, we knew from the Colorado Open Records Act emails that Martin coordinated public policy with his former colleagues. To be precise, with this FOIA request, we were trying to find out how much environmental policymaking was being rendered by unelected EPA bureaucrats colluding with unelected bureaucrats. (This is a practice known as “sue and settle” policymaking).

Here’s a timeline of what followed:

May 1, 2012: CEI files FOIA request for EPA Region 8 Administrator James Martin seeking all business emails between him and Environmental Defense. Our request noted that Martin had a history of using non-official email accounts to consuct official business.

May 7, 2012: EPA acknowledges our FOIA request, and assigns it ID number 08-FOI-00203-12

July 5, 2012: EPA responds to the request. The Agency provides 11 emails from an official “epa.gov” account. Regarding our specific request for EPA’s FOIA search to include all emails, in both official and non-official account, EPA states, “Documents sent to a personal email address that an individual is not intending to use for official purposes are not Agency records.” That’s all they said. We were confused. It seemed as if EPA was dodging the issue.

July 19, 2012: CEI files an administrative appeal of EPA’s July 5 FOIA response.

September 9, 2012: Although the Freedom of Information Act gives EPA 20 days to respond to an administrative appeal, the Agency ignores CEI’s July 19 appeal for more than 6 weeks. So we sued EPA in the District of Colubia federal district court. Here’s a copy of our complaint.

November 19, 2012: EPA files a motion to dismiss the case. The Agency’s motion relies on a signed affidavit by Martin, attesting to the fact that he had conducted a “broad” search of his personal email account, and had produced 19 records. Of the 19 records, Martin testified that “While some of these documents mention EPA of environmental issues, I did not solicit them, nor did I act on them in connection with my EPA position.” Based on this evidence, EPA moved to close the case.

January 29, 2013: Senator David Vitter and Rep. Darrell Issa launch an investigation into Martin’s use of private emails to conduct public business.

February 19, 2013: EPA Region 8 Administrator James Martin resigns.

March 7, 2013: EPA withdraws its motion to dismiss the case. The Agency tells CEI that Martin had “alerted us to additional documents that he came across. In a motion filed in court that day, EPA states,

“Based upon its review and analysis of the content of the additional documents, the EPA has concluded that there are additional documents from Mr. Martin’s personal, non-Government email account responsive to the FOIA request at issue in this litigation.”

Present day: CEI, the Department of Justice, and EPA are negotiating a full release of Martin’s newfound emails.

The timeline speaks for itself. Martin had a long history of using private emails to conduct official business. CEI learned of this history from the Independence Institute. CEI then filed a FOIA request to probe the extent to which Martin continued to employ non-official emails to perform official work. When EPA obfuscated, CEI sued. In the course of this litigation, Martin lied to CEI, EPA, the Justice Department, and a federal judge. Then he resigned. Case closed.

Good riddance. This is a positive development. Martin is not capable of being a disinterested civil servant. Rather, he is a professional environmentalist who has spent a career demonizing industry. It’s one thing to war with economic development as a lawyer at a deep-pocketed green group like Environmental Defense. It’s an entirely different ballgame when these same anti-industry zealots are allowed to take the reins of the EPA, and use state power to “bankruptentire sectors of the economy.

Country can breathe sigh of relief. We’re still stuck with him…

March 4, 2013 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

By William Yeatman and Amy Oliver Cooke

As Coloradans we thought we might have to apologize to the rest of the country if President Barack Obama nominated former one-term Colorado Governor Bill Ritter to head the Energy Department. If the President wanted to make electricity costs skyrocket and the eco-left community happy, Ritter was his guy, but the President didn’t pick him.

Today, the Denver Post’s Allison Sherry broke the news that MIT physicist Ernest Moniz got the nod and the environmental community is none too pleased according to Mother Nature Network:

Despite his dense résumé and desire to cut emissions, however, Moniz can be a polarizing figure in scientific and environmental circles. Few experts deny the value of a scientist as DOE chief, but many fans of renewable energy worry about Moniz’s gusto for natural gas and nuclear power — not to mention his financial ties to the energy industry.

‘We’re concerned that, as energy secretary, Ernest Moniz may take a politically expedient view of harmful fracking and divert resources from solar, geothermal and other renewable energy sources vital to avoiding climate disaster,’ Bill Snape of the Center for Biological Diversity said in a recent press release. ‘We’re also concerned that Moniz would be in a position to delay research into the dangers fracking poses to our air, water and climate.’

And the Washington Post reports:

But over the past couple of weeks, many environmentalists and some prominent renewable energy experts have tried to block the nomination of Moniz because of an MIT report supporting “fracking” — as hydraulic fracturing is commonly known — and because major oil and gas companies, including BP, Shell, ENI and Saudi Aramco, provided as much as $25 million each to the MIT Energy Initiative. Other research money came from a foundation bankrolled by shale gas giant Chesapeake Energy.

‘We would stress to Mr. Moniz that an ‘all of the above’ energy policy only means ‘more of the same,’ and we urge him to leave dangerous nuclear energy and toxic fracking behind while focusing on safe, clean energy sources like wind and solar,’ Sierra Club executive director Michael Brune said in a statement Monday.

The Sierra Club doesn’t have much credibility because financially it was sleeping with the enemy, having taken $26 million from Chesapeake Energy to destroy the market for coal.  One place they enjoyed great success was in Colorado with HB 1365, the fuel switching bill and cornerstone of Ritter’s “New Energy Economy.”

Governor Ritter coined the term New Energy Economy for his signature agenda. In practice, his New Energy Economy entails three policies: (1) a Soviet-style green energy production quota; (2) subsidies for green energy producers; and (3) a mandate for fuel switching from coal to natural gas. Renewable energy is more expensive than conventional energy, and natural gas is twice as expensive as coal in Colorado, so these policies inherently inflated the cost of electricity.

Last month, the Independence Institute published the first ever line item expensing of Ritter’s energy policies, and the results were shocking. In 2012, the New Energy Economy cost Xcel Energy (the state’s largest investor-owned utility) ratepayers $484 million, or 18 percent of retail electricity sales.

This princely sum purchased the equivalent of 402 megawatts of reliable capacity generation. By comparison, Xcel had a surplus generating capacity (beyond its reserve margin) in 2012 of 700 megawatts—almost 75 percent more than the New Energy Economy contribution. Thanks to Governor Ritter’s energy policies, Xcel ratepayers in Colorado last year paid almost half a billion dollars for energy they didn’t need.

In addition to implementing expensive energy policies, Governor Ritter also has experience picking losers in the energy industry. In May 2009, Governor Ritter hand-delivered to Secretary Chu a letter in support of a $300 million loan guarantee for Colorado-based Abound Solar, a thin-filmed solar panel manufacturer. In the letter Ritter claimed Abound would “triple production capacity within 12 months, develop a second manufacturing facility within 18 months and hire an additional 1,000 employees.”

Taxpayer money couldn’t keep Abound afloat, which never reached production capacity. After its solar panels suffered repeated failures, including catching fire, Abound declared bankruptcy in early 2012 leaving taxpayers on the hook for nearly $70 million and even more at the state and local level. A former employee explained, “our solar modules worked so long as you didn’t put them in the sun.”

Abound Solar wasn’t the only pound-foolish Stimulus spending associated with Governor Ritter. During his administration, the Colorado Energy Office’s coffers swelled with almost $33 million in stimulus subsidies for weatherization efforts. According to a recent report by the Colorado Office of State Audits, the Ritter administration failed to even maintain an annual budget for the program. As a result, the audit was unable to demonstrate whether the money had been spent in a cost effective manor. All told, the auditor found that the energy agency could not properly account for almost $127 million in spending during the Ritter administration.

Ritter told the Fort Collins Coloradoan that the scathing audit accusing the agency under his watch of shoddy management practices was not the reason the President passed over him for Energy Secretary.

The former Governor is especially proud of the job creation associated with the New Energy Economy. To be sure, throwing taxpayer money at any industry would create jobs. The problem occurs when the public money spigot runs dry. In this context, an October 22, 2012 top fold, front page headline in the Denver Post is illuminating: “New energy” loses power; A series of setbacks cost over 1,000 jobs and threatens the state’s status in the industry. To put it another way, in the two years since Ritter left office, his New Energy Economy has atrophied in lockstep with the reduction in public funding.

Ritter has taken to proselytizing for the gospel of expensive energy. He founded the Center for the New Energy Economy, the purpose of which is to, “provide policy makers, governors, planners and other decision makers with a road map that will accelerate the nationwide development of a New Energy Economy.” He even brought with him the former head of the beleaguered energy office Tom Plant to work for him as a “policy advisor.”

So far Ritter’s bad energy policy has remained largely within the Centennial State, and, for now, that’s where it will stay. With the choice of Moniz, the rest of the country can breathe a sigh of relief. For Coloradans, we’re still stuck with him.

William Yeatman is the Assistant Director of the Center for Energy and Environment at the Competitive Enterprise Institute and a policy analyst for the Independence Institute in Denver, Colorado. Amy Oliver Cooke is the Director of the Energy Policy Center for the Independence Institute

Natural gas double price of coal in Colorado

February 7, 2013 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

According to the most recent Form 10-K that Xcel Energy, Colorado’s largest investor owned utility (IOU), filed with the Security and Exchange Commission dated December 31, 2011, electricity generation from natural gas was more than double the price of electricity generated from coal in Colorado.

A table on page 18 of the report shows that in 2011, Xcel produced 76 percent of its electricity from coal at a cost of $1.77 per MMBtu while natural gas cost $4.98 per MMBtu while providing 24 percent of Xcel’s electricity.

As more and more of Xcel’s electricity is mandated to come from natural gas thanks to HB 1365, the fuel switching bill and the cornerstone of what former Governor Bill Ritter coined the “new energy economy,” along with additional regulations and out right bans on hydraulic fracturing, Xcel ratepayers should get used to spending more and more on their electricity bills.

2012 snapshot of New Energy Economy’s cost to ratepayers

January 21, 2013 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

The numbers are in, and they aren’t pretty. Four of the largest cost driving pieces of legislation enabling Colorado’s New Energy Economy cost Xcel Energy ratepayers nearly half a billion dollars in 2012 alone. Adding insult to injury, some of the electricity produced wasn’t needed in the first place according to a just released report from the Independence Institute’s energy policy analyst William Yeatman. So Xcel ratepayers paid handsomely for electricity that ended up as surplus.

Using Xcel’s regulatory filings Yeatman determined:

  • In 2012, the New Energy Economy cost Xcel ratepayers $484 million – more than 18 percent of Xcel’s total electricity sales. Based on 1.4 million ratepayers, the New Energy Economy cost $345 per ratepayer in 2012.
  • Due to a depressed economy, there is an oversupply of electricity generation onXcel’s system, which means Xcel ratepayers spent $484 million on the New Energy Economy in 2012 in order to obtain electricity that they did not need

Yeatman also breaks down the cost by each of the four pieces of legislation, which includes the renewable energy mandate and its massive $343,000,000 cost. It’s clear that State Representative Max Tyler’s and former Governor Bill Ritter’s fanciful promise of a two percent rate cap is much different in reality.

Prior to the New Energy Economy, Colorado worked on a least cost principle meaning utilities were to deliver reliable power to ratepayers in the most cost effective manner. When it comes to renewable mandates and the New Energy Economy, state lawmakers would be wise to remember economist Milton Friedman’s words, “there’s no such thing as a free lunch.”

Colorado: Xcel’s cash cow

October 31, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Last week Minnesota-based Xcel Energy announced that it beat market expectations with third quarter earnings increasing an impressive 18 percent. Colorado’s largest investor owned utility cited hot weather, rate hikes, and lower costs as reasons for its strong 3Q performance.

Colorado (PSCo) outperformed all other Xcel subsidiaries with a 24 percent increase for the third quarter 2012 versus 2011. For the nine months ending September 30, 2012, Colorado customers provided a 19 percent increase in earnings to Xcel shareholders while total company (sum of all subsidiaries) earnings per share are up only ten percent.

Xcel Energy services electric and gas customers in Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin.

Ugly numbers for Xcel ratepayers

May 31, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Lobbying at the state capitol:

According to January-April 2012 disclosure forms available on the Secretary of State’s Web site, Xcel Energy paid $126,393.90 for seven lobbyists at the state capitol. This included two lobbying firms and three Xcel in-house lobbyists.  The highest paid was 5280 Strategies run by Mike Beasley, well-known Capital Hill insider and former staffer for Governor Bill Owens.

Jan-12

Feb-12

Mar-12

Apr-12

5280 Strategies

$13,250.00

$13,250.00

$13,250.00

$13,250.00

$53,000.00

JLH Consulting

$8,333.37

$8,333.37

$8,333.37

$8,333.33

$33,333.44

Daniel Pfeiffer

$2,643.00

$5,485.80

$2,247.06

$2,247.00

$12,622.86

Michelle Stermer

$2,856.40

$3,858.96

$4,042.72

$4,042.00

$14,800.08

Ethnie Treick

$2,597.00

$3,635.52

$2,597.00

$3,808.00

$12,637.52

Total

$29,679.77

$34,563.65

$30,470.15

$31,680.33

$126,393.90

Some of the ratepayer-friendly bills Xcel successfully lobbied to kill in 2012 include:

In contrast, the Colorado Education Association spent a mere $45,384.80 on four lobbyists during the same period.

Jan-12

Feb-12

Mar-12

Apr-12

Garromone Mason

$4,014.87

$4,014.87

$4,014.87

$4,014.87

$16,059.48

Anthony Salazar

$500.00

$500.00

$500.00

$500.00

$2,000.00

Julie Whitacre

$3,615.00

$3,615.00

$3,615.00

$3,615.00

$14,460.00

Karen Wick

$3,216.33

$3,216.33

$3,216.33

$3,216.33

$12,865.32

Total

$11,346.20

$11,346.20

$11,346.20

$11,346.20

$45,384.80

Xcel Energy spends even more on lobbying in its home state of Minnesota. According to the Minneapolis/St. Paul Business Journal, Xcel shelled out a whopping $2.43 million for 39 lobbyists in 2011 alone, making it the champion of lobbyist spending.

Xcel “the Corporate Tax Dodger”:

Citizens for Tax Justice and the Institute on Taxation and Economic Policy released their list of “Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010.” The left-leaning organizations describe their report:

This study takes a hard look at the federal income taxes paid or not paid by 280 of America’s largest and most profitable corporations in 2008, 2009 and 2010. The companies in our report are all from Fortune’s annual list of America’s 500 largest corporations, and all of them were profitable in each of the three years analyzed. Over the three years, the 280 companies in our survey reported total pretax U.S. profits of $1.4 trillion.

  • In 2009, Xcel’s profit was $1.048 billion, with a tax rate of -3.8 percent.
  • Between 2005-2009, the tax rate for Colorado’s largest investor owned utility was 1.78 percent.

Furthermore, In an article titled “Lobbyists help lower corporate tax rates for companies investing in alternative energy” the Sunlight Foundation reported last year that Xcel was one of several energy companies that spent millions on lobbying for lower tax rates at the federal level:

Taxes have been a focal lobbying point for many of these companies…Two of them—NextEra Energy and Xcel Energy—reported spending millions on lobbying while listing taxes on their disclosures more than any other issue in 2010. Xcel reportedly paid a 1.78 percent tax rate over the 2005-2009 period.

The teams assembled by NextEra and Xcel included lobbyists with years of tax experience, often on the appropriate congressional committees or in the executive branch. They include a former member of the Ways and Means Committee, a former tax counsel for the Ways and Means Committee, a former political advisor to Senate Finance Committee chairman Max Baucus, and a former tax counsel to the Senate Finance Committee.

In the fourth quarter of 2010, six out of the fifteen outside lobbying firms hired by NextEra and Xcel listed energy tax provisions as the sole issue they lobbied on. Six other firms lobbied on a mix of issues including taxes.

Additional Numbers:

  • In 2008, former Xcel CEO Richard Kelly received $5.1 million in total compensation. In 2010, Kelly received $11.3 million, an increase of more than 120 percent.
  • Ben Fowke replaced Kelly who retired last year. Bloomberg Businessweek reports Fowke’s total compensation for 2011 was $9,676,420.
  • Over the last several years, the Public Utilities Commission (PUC) has approved Xcel rate increases of roughly 20 percent on Colorado consumers, with another 20 percent in increases expected within the next several years as well. Most recently the PUC approved a $114 million rate increase.
  • In his “Letter to Shareholders” in the 2011 Annual Report, Fowke wrote, “Ongoing earnings per share were $1.72 in 2011, compared with $1.62 in 2010. That means we achieved the upper half of our guidance range, making 2011 the seventh consecutive year in which we have met or exceeded our earnings guidance.  Ongoing earnings increased primarily due to higher electric margins as a result of warmer-than-normal summer weather across our service territory and rate increases in various states.” [Emphasis mine] Translation: Tiered rates penalize working families and line shareholders pockets.
  • Fowke also wrote, “stock price rose 17 percent in 2011 hitting a nine-year high in December.”
  • Xcel brags about being the number one provider of wind energy, which is more expensive and heavily subsidized.
  • According to the first quarter 2012 earnings report, Xcel earned 38 cents per share (EPS). Colorado’s roughly 1.4 million ratepayers representing slightly more than 25 percent of Xcel’s total customers accounted for 19 cents, or 50 percent, of the company’s EPS.  A trend we noticed in 2010.

Xcel Energy lobbies for consumers to pay more and for it to pay less, which would be fine if ratepayers had a choice in service providers.  But we don’t. As a result, Xcel profits handsomely as a state-sanctioned monopoly while consumers have no choice but to pay ever-higher energy bills.

SB 178: sordid tale to increase renewable mandate

April 28, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

“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.

Winners

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.

Losers

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.

Will state legislature cave to Xcel and eco-left…again?

April 26, 2012 by Amy · Comments Off
Filed under: Archive, HB 1365, New Energy Economy 

Colorado already has the most expensive electric rates of all neighboring states and the second highest in the Rocky Mountain West, with projections to go even higher in the near future.  Now, a bill just introduced into the state senate threatens to make Colorado’s energy rates even more expensive. The following is a column from the Colorado Consumer Coalition about the dangers of SB 178. Senator Kevin Lundberg offered an amendment that would have achieved the bill’s supposed primary purpose and saved consumers money, but it was voted down as the column details.

Colorado consumers—from Denver down to Pueblo and all across the state—could wind up paying even more for their electricity following a troubling development at the legislature this week.  An obscure bill just introduced on Tuesday with almost no warning, only days before the end of the 2012 session, would pull the rug out from under the state’s public utilities and turn their long-term energy planning inside-out. And ratepayers would be left holding the bag.

Senate Bill 178 would scrap a key feature of Colorado’s renewable-energy mandate, on which utilities have based their plans and projections for years to come; the change would force them to get even more of their electricity from pricey renewables like wind and solar power than the law now requires. Specifically, the bill would take away a break that utilities have been able to pass on to consumers as they strive to meet costly state mandates to derive 30 percent of their electricity from renewables by 2030.

The break to ratepayers was enacted in 2004 along with the mandates because those who had been advocating for the shift to a greater reliance on alternative fuels also realized such a seismic change doesn’t come cheaply. And it’s neither fair nor even possible to make hard-pressed home- and business owners bear the whole burden. So, the policy’s authors not only placed a 2-percent cap on year-to-year rate increases due to the increased cost of renewables, but they also wrote the law to give extra credit to utilities for switching to alternative energy sources. That gave the utilities greater flexibility in meeting the statutory standards for renewables so consumers wouldn’t have to dig so deeply into their pockets.

Now, SB 178 aims to monkey-wrench that delicate balance. By revoking the extra credit for switching to renewable energy after 2015, the bill effectively would require the public to rely on an even higher percentage of renewable energy sources than most of the state’s utilities had anticipated. The result would be to wreak havoc with the balance sheets and strategic plans of the utilities, for-profit and nonprofit alike. They’d have to scramble to acquire more renewable sources for power and, inevitably, pass the cost on to the public through higher power bills.

Not surprisingly, when the bill was unveiled Wednesday at a meeting of the Senate Judiciary Committee, lawmakers got an earful from representatives of some of those utilities as well as other stakeholders—many of whom had only heard of the legislation a few days earlier and, in some cases, only hours prior to the hearing. And they told lawmakers point-blank what would happen if the bill were enacted.

“This bill will result in increased costs to… members and their customers,” said Thomas Dougherty, representing Tri-State Generation and Transmission Association, a wholesale electric power supplier owned by 44 electric cooperatives and serving 900,000 Coloradans.

Ratepayers of Black Hills Energy, which serves the Pueblo region, would be dealt a major blow by the legislation, the company’s Wenday Moser told lawmakers Wednesday.

“We are very concerned about Senate Bill 178 because we are concerned about our ability to meet the renewable energy standard,” Moser said. “As of now, Black Hills is marginally meeting the standard…We are struggling to meet that standard.”

Dougherty had noted in his testimony that even though the law caps renewable-energy cost increases at 2 percent a year on power bills, that increase in an of itself still can pack a punch for consumers. And Moser made clear that the cap really won’t spare consumers at all over the long run.

She pointed out that companies such as hers simply will be forced to assess that extra 2 percent “for many more years” until recovering the added costs of the additional renewables. After all, the utilities are legally bound to attain the renewable-energy standard; it’ll just take them longer to recover those costs from consumers.

Why this bill at this time—out of the blue like this? What possibly could have motivated some lawmakers to propose such a reckless policy for so little gain—at a time when Colorado already is well on its way toward greater reliance on renewable energy?

A representative of Attorney General John Suthers told the committee at Wednesday’s hearing that his office wasn’t behind the bill but had endorsed it because of concerns about a provision in the current law allowing the extra renewable-energy credits for purchases of Colorado energy but not for renewables originating outside the state. That, the AG’s rep said, set up Colorado for a constitutional challenge in court.

Fine, responded a skeptical Sen. Kevin Lundberg, of Berthoud—then why not simply extend the same extra credit to any acquisition of renewable energy from outside Colorado as well? Lundberg was told the attorney general would in fact be fine with that alternative, so Lundberg proposed it as an amendment to the bill. Unfortunately, it was voted down.

Lundberg and fellow Judiciary Committee Sens. Steve King, of Grand Junction, and Ellen Roberts, of Durango, deserve credit for asking tough and probing questions about the bill during the hearing. All three laudably voted against the measure, but they were outgunned by the majority, and the measure now moves to the Senate floor for further action.

Pending what happens next, let’s give credit to Black Hills Energy, too, for telling lawmakers what they really needed to hear—whether they wanted to or not—about a costly, destructive bill with no discernible value to Colorado Consumers.

My take: this bill isn’t about leveling the playing field for in-state versus out-of-state renewable energy producers but rather about forcing Colorado energy consumers to rely more heavily upon unreliable, expensive wind and solar energy. To make matters worse, this will be a windfall for Xcel Energy because the more expensive electricity is, the more Xcel makes. If this bill gets fast-tracked through the legislature like HB 1365, the infamous fuel-switching bill, consumers will have more proof that Xcel “owns” the state legislature.

Baker out at PUC

March 31, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Public Utilities Commissioner Matt Baker is leaving the PUC to join the William and Flora Hewlett Foundation, a left-leaning non-profit, as “an officer in its Environment Program” foundation officials announced yesterday. Former Governor Bill Ritter appointed the environmental activist Baker in 2008, and his term had expired without current Governor John Hickenlooper acting to reappoint Baker to another term.

Baker was instrumental in steering the state’s “new energy economy” as both an activist and a PUC commissioner. In January the Energy Policy Center raised questions about Baker’s ability to serve as an independent regulator:

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.

This is blow to the environmental left and Xcel Energy because Baker provided them a seemingly credible voice to perpetuate the myth that Colorado’s 30 percent renewable energy mandate costs electricity ratepayers a mere two percent on their Xcel Energy bills. As we have demonstrated before and reiterated in January this is simply untrue, and Baker and Xcel both know it.

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.

We were also the first to expose that Baker and fellow commissioner Ron Binz spent a lot of time traveling, which led to ethics complaints being filed against both men. Binz left the PUC rather than seek a second term. In December the ethics commission found that Binz violated the state constitution by accepting a trip paid for by a company he was supposed to regulate. The same commission recently decided there was not “sufficient evidence” to prove that Baker’s trip to Seville, Spain, paid for a spanish government owned company, violated Colorado’s ethics law.

What remains to be seen is who Governor Hickenlooper will appoint to replace Baker. If the Governor’s first appointee, Chairman Josh Epel, is any indication of how he envisions the role of the PUC, ratepayers can expect more balanced treatment in the future.

Fix is in: Senator misses testimony, knows to vote with Xcel

March 21, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Senator Betty Boyd, a democrat member of the State, Veterans, and Military Affairs Committee, was not present in the committee hearing for any of the testimony either for or against HB 1172, the carbon tax repeal. Yet she knew exactly how to vote — against electricity ratepayers, against the environment, and for Xcel Energy.

According to lobbying disclosure reports available on the Secretary of State’s Web site, Xcel spent $64,243.38 in January and February to lobby lawmakers in the Colorado state legislature. Today it paid off when HB 1172 was killed in the Senate committee on a party line vote. After not ever making it out of committee last year, this year the “phantom carbon tax” repeal actually passed the House and made it all the way to committee in the Senate.

No worries for Xcel, all three Democrat Senators — Rollie Heath, Bob Bacon, and Betty Boyd — were there to stop any further progress on the bill sponsored by RepublicanTed Harvey. Boyd was in another committee hearing during testimony on HB 1172. After testimony was complete, she was called back for the vote. Committee Chair Rollie Heath asked her if she had any questions. She answered, “No,” and was pretty sure that she understood what was being proposed.

Boyd missed powerful testimony from Syndi Nettles Anderson, an engineer and NREL employee who is getting her PhD in biofuels. Anderson, who is also looking to replace Bob Bacon once he is term limited in SD 14, said that the imputed carbon tax on coal actually harms the environment because it incentivizes other technologies that have not yet been fully tested for their environmental impact. Some of these technology may do more harm than carbon emissions.

The results of today’s committee hearing does lend some credibility to a saying that is whispered in the halls of the capitol: “Xcel owns this place.”

Full Disclosure: I testified today on behalf of HB 1172. My full testimony is below.

Testimony on behalf of

HB 1172 No Imputed Carbon Tax

March 21, 2012

Senate State, Veterans, and Military Affairs 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 the passage of 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.”

It is a selective, regressive tax – selective on resource fossil fuels and selective on customers (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.

Ratepayers already are saddled with costs that do exist — $1.1 million for Xcel executives to travel via private jet. Or just in the last two months, $64,243.38 to lobby the Colorado state legislature, part of which is to kill this bill. Have you ever wondered where the “carbon tax” goes? Does Xcel cut a check to the state of Colorado or to the federal government? No.  It doesn’t.

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.”

But 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 the Independence Institute was correct in February 2011 when we predicted that there would be no national carbon tax in the near future with this statement:

“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 difference between a carbon and non-carbon compliance plan is substantial – roughly $584 million between 2014-2021. That’s over $400 per Colorado ratepayer for a tax that doesn’t exist.

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.

« Previous PageNext Page »