Does Indiana Have a Lower Tolerance for Corruption than Colorado?

December 23, 2010 by williamyeatman · 3 Comments
Filed under: Archive, New Energy Economy 

The Hoosier State is roiling over inappropriately cozy relationships between state regulators and the utility they oversee. It started when a top lawyer for the Indiana Utility Regulatory Commission took a job with Duke Energy shortly after acting as a judge in a major rate-case before the utility. That got Governor Mitch Daniels’ attention. Then the Indianapolis Star unearthed a trove of emails revealing a troubling intimacy between IURC staffers (including Commissioners) and Duke Energy. So far four people have been sacked (the lawyer who started it all, and three utility execs) and the scandal is growing.

Compare Indiana’s palpable outrage to the situation in Colorado, where the General Assembly enacted legislation written by energy companies to benefit themselves…and no one cares.

I’m talking about HB 1365, the Clean Air Clean Jobs Act, legislation that effectively mandated fuel switching from coal to natural gas for almost 1,000 megawatts of electricity generation.

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HB 1365 Update: Don’t Be Shocked If Xcel Ditches the PUC’s HB 1365 Plan

December 14, 2010 by williamyeatman · Comments Off
Filed under: Archive, HB 1365 

Despite media reports to the contrary, HB 1365 isn’t settled

It has been widely reported that the book closed on the Clean Air Clean Jobs Act last Thursday, when the PUC selected an implementation plan after almost four months of deliberations, but this is untrue. In fact, there’s another chapter of this story, and the ending may prove a shocker.

A Quick Review of HB 1365…

HB 1365, the Clean Air Clean Jobs Act, mandates that Xcel file a plan by August 15 2010 that would:

  • be implemented by December 31, 2017;
  • meet “reasonably foreseeable” state and federal air quality regulations;
  • achieve at least 70% reductions in nitrogen oxides emissions from at least 900 megawatts of coal fired power plants

By December 15, 2010, the Public Utilities Commission (“PUC”) must approve, deny, or modify Xcel’s proposed plan. The PUC chose a plan last week.

However, the legislation gives Xcel the right to withdraw its plan (i.e., the right to walk away) if it “disagrees with the [PUC’s] modifications.”

…Back to my point: Xcel could walk away

The Colorado media, in its coverage of the PUC’s selection of a HB 1365 implementation plan last Thursday, seems to have forgotten about Xcel’s right to withdraw from the proceedings if the utility disagrees with the PUC decision.

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Regarding HB 1365, Here Are Two Numbers To Remember

December 13, 2010 by williamyeatman · Comments Off
Filed under: Archive, HB 1365 
  • $8
    Doesn’t anyone remember the summer of 2008 when natural gas prices spiked to $8 dollar/mmbtu? Currently, coal supplies almost 70% of Xcel’s electricity portfolio; In 2018, thanks to the Clean Air Clean Jobs Act, coal will supply less than half, while natural gas’s share will increase to more than 40%. The upshot is that Xcel customers will be on the hook for a lot more natural gas. In addition to costing more than three times coal, natural gas prices historically have proven much more volatile than coal prices.
  • $210 million
    Doesn’t anyone remember when Xcel energy spent $210 million on state-of-the-art sulfur dioxide pollution controls on Cherokee 2, 3, and 4 in 2001? Last week, the PUC approved an HB 1365 implementation plan that would retire these plants early, despite the $210 million pollution controls installed nine years ago. The upshot is that Xcel ratepayers are now on the hook for the full cost of these capital expenditures, for which they received only half of the value (due to the early closure of these plants). That’s a waste of roughly $100 million.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.

2010 Ozone Data: More Evidence That CDPHE Is Cooking the Books

December 12, 2010 by williamyeatman · 1 Comment
Filed under: Archive, CDPHE, HB 1365 

Twice I’ve provided evidence that the Colorado Department of Public Health and Energy (CDPHE) has inflated projections of ozone ambient air concentrations (see here and here).

Those were critiques of ozone projections. This year is the first year that we have a data set against which to judge the accuracy of CDPHE ozone modeling during the New Energy Economy era. Unfortunately for Coloradans, the results are even worse than I’d feared. See for yourself:

2010 Ozone Air Concentrations: CDPHE vs. Reality
Monitoring Station

CDPHE Projections (Ozone ppb)

Actual Projections (Ozone ppb)

Highland

77.3

75

S. Boulder Creek

80.7

72

Chatfield State Park

83.4

79

Arvada

79.1

75

Welch

75

72

Rocky Flats North

84.9

76

NREL

82.2

74

Fort Collins West

84.8

75

Greely-Weld Tower

77.5

73

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The PUC Has Chosen a HB 1365 Plan…So What’s Next?

December 10, 2010 by williamyeatman · 1 Comment
Filed under: Archive, HB 1365 

The PUC on Thursday decided on an implementation plan for the Clean Air Clean Jobs Act. Read about it here, here, and here.

So what’s next?

First, Xcel must decide if PUC’s chosen plan is acceptable. HB 1365 allows Xcel “to withdraw its application,” if it “disagrees with the Commission’s modifications to its proposed plan.”

There’s no guarantee that Xcel will approve the plan. After all, the PUC spurned Xcel’s “preferred” plan, its “recommended” plan, and its third choice. Moreover, the PUC rejected Xcel’s request to get paid up front for its investments to implement HB 1365. I don’t think the utility had intended to compromise to this extent at the outset of the proceedings, so I wouldn’t be shocked if the utility walked away from the plan (although I would be surprised).

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Review of December 8 PUC Hearing on HB 1365: PUC Punts

December 9, 2010 by williamyeatman · Comments Off
Filed under: Archive, HB 1365 

The PUC decided almost nothing during four hours of deliberations yesterday. The two major issues discussed were cost recovery and what to do with the 352 megawatt Cherokee 4 coal fired power plant in Adams county.

Regarding cost-recovery, the debate focused on timing. Xcel wants to be paid up front for the investments required to implement HB 1365; historically, the PUC has allowed cost recovery only after the asset in question has been proved “used and useful.” The text of HB 1365 affords the PUC extraordinary discretion to create a ratemaking regime to incent Xcel to achieve the goals of the legislation, so the traditional ratemaking procedure (i.e., waiting until assets are “used and useful”) is not on the table. Indeed, Xcel’s Statement of Position suggested that the utility will exercise its right to reject HB 1365 if the PUC fails to provide for “timely rate recovery.”

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EPA’s Ozone Decision Means That HB 1365 Is Most Cost-Ineffective Environmental Policy, Ever

December 9, 2010 by williamyeatman · Comments Off
Filed under: Archive, CDPHE, HB 1365 

The putative mission of HB 1365 is for Colorado to address “reasonably foreseeable” federal air quality regulations in a holistic fashion, which is supposedly more cost-effective than a piece-meal approach. When it rolled out the legislation, the Ritter administration told the PUC that there were eleven “current and foreseeable air quality requirements (see slides 13 and 14).” As is explained here, this was a gross misrepresentation; in fact, there were in fact only two such regulations in the federal pipeline: “regional haze” and ozone.

Make that one. Yesterday, the EPA again delayed a decision on whether to tighten the National Ambient Air Quality Standard for ozone. A rulemaking was expected this month, but the EPA said it needs more time to ensure that they are relying on the best science possible, and it suggested that it won’t act until July. This is the third time that the EPA has delayed this determination since HB 1365 was enacted.

The prevailing interpretation of the delay is that President Obama is tacking right economically in the wake of last month’s shellacking at the polls. As such, it is almost inconceivable that the EPA won’t kick the ozone can further down the road, at least through the next election cycle, unless the President decides against running for reelection in 2012.

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Heading into HB 1365 Crunch Time, A Rundown of Who Is Hoping for What

December 7, 2010 by williamyeatman · Comments Off
Filed under: Archive, HB 1365 

As reported yesterday by Mark Jaffe in the Denver Post, the PUC on Monday partially ruled on Xcel’s HB 1365 implementation plan. Nothing controversial was determined; instead, the PUC approved elements that were common to all of the plans “on the table.”*

The disputed subject matter was left for today—namely, what is to be done with the 352 megawatt Cherokee 4 plant in Adams County?

Heading into crunch time, here’s a rundown of who wants what and why.

What Xcel Wants:

Xcel has two goals. First, it wants to build as much stuff as possible. The more it builds, the larger the expenditures on which it can reap a 10.5% rate of return. Xcel’s second goal is to seize an increased share of the wholesale electricity market at the expense of independent power producers. Currently, Xcel generates 50% of the power it sells, and it wants to increase that figure to 60%.

In order to furthest advance these goals, Xcel wants to retire Cherokee 4, and in its stead build a 314 megawatt 1×1 combined cycle natural gas plant in 2017. That way, Xcel would get a 10.5% return on the construction costs of building a $345 million new gas plant AND it would increase its share of the wholesale electricity market by almost 140 megawatts (assuming Xcel converts the 1×1 combined cycle plant into a 2×1 combined cycle plant, as it has said it intends to do). This strategy is embodied in Plan 6.2J.

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Response to Senator Tim Wirth’s Denver Post Column on Colorado’s “Clean Energy Economy”

December 3, 2010 by williamyeatman · Comments Off
Filed under: Archive, HB 1365 

On Tuesday November 30, former Colorado Senator Tim Wirth wrote an op-ed for the Denver Post on Colorado’s “Clean Energy Economy.” The article, titled, “Leading the way to a sustainable energy future,” is mostly wrong.

To wit, he suggested that the 2010 Clean Air Clean Jobs Act (CACJA), legislation that effectively requires fuel switching from coal to natural gas, is a welcome alternative to “waiting for the EPA to mandate a plan to deal with air pollutants.” This is the same Big Brother bogeyman that the Ritter Administration used to push the bill through the General Assembly.

In fact, there is no federal crackdown. The CACJA furthers compliance with provisions of the Clean Air Act that afford Colorado great discretion in choosing pollution control strategies. As such, it was the Ritter administration’s choice to require ultra expensive coal fired controls. For political purposes, the Ritter administration pinned the blame for its onerous regulations on the federal government. This phantom federal threat, in turn, was the justification for fuel switching.

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Can CDPHE Be Trusted To Measure Ozone?

November 23, 2010 by williamyeatman · Comments Off
Filed under: Archive, CDPHE, HB 1365 

Earlier this month, I asked whether CDPHE (a.k.a., “the Department”) is cooking the books on Colorado ozone. In particular, it struck me as suspicious that the Department used data from 2006, an anomalously active wildfire season, as inputs for models used to project ambient air concentrations of ozone through 2020. You can read all about it here, but in a nutshell, wildfires inflate ozone, so the CDPHE’s use of the second-most active wildfire season on record as a constant in an ozone model is inappropriate…unless, of course, it was trying to exaggerate the threat of a federal crackdown on air quality in order to, say, pass legislation that mandates fuel switching, like HB 1365. Remember, the Denver-area’s non-attainment for federal ozone regulations was a major reason put forth by the Ritter administration in support of Clean Air Clean Jobs Act.

**Here’s the Wikipedia entry on ozone; for this post, all you need to know is that nitrogen oxides (NOx) are a primary precursor for the creation of ozone

In the two weeks since I wrote that post, I’ve become even more suspicious of the CDPHE’s ozone practices. Here’s why. On page 1-4 of the “2015 and 2020 Ozone Projections for the Denver Area,” ENVIRON (the modeling company) explains that input data for NOx emissions was provided by the Department. On page 2-24, EVIRON states that NOx emissions from point sources were projected to increase 23% by 2015 and 46% by 2020. So CDPHE told the modelers that NOx was expected to increase in Colorado.

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