Filed under: CDPHE, Environmental Protection Agency, Legal, Legislation, New Energy Economy, regulations, renewable energy, solar energy, wind energy
Across all sectors of Colorado the cost of electricity has skyrocketed more than 67 percent between 2001 and 2014, easily exceeding median income growth and the expected rate of inflation for the same period, an extended analysis of government energy records by the Independence Institute has revealed.
For all sectors between 2001 and 2014, the cost per kilowatthour jumped from just over 6 cents to more than 10 cents, or 67.11 percent.
Data obtained by the Independence Institute from the Energy Information Administration and the U.S. Census Bureau showed an increase in electricity rates for residential, commercial, industrial, and transportation sectors throughout the state contributing to the across-the-board growth in prices. In November, the Energy Policy Center reported a staggering increase of 63 percent for residential customers in Colorado.
“Retail residential electricity rates increased from 7.47 cents per kilowatthour in 2001 to 12.18 cents per kilowatthour by 2014, a 63.1 percent hike. Coloradans’ median income, however, went up just 24.1 percent, from $49,397 to $61,303. Median income in Colorado actually declined between 2008 and 2012,” the report concluded. It also noted that the U.S. Bureau of Labor and Statistics projected just a 34 percent increase in inflation for the 14 year period, using the agency’s CPI inflation calculator.
And while the data for late 2015 from the BLS indicated a modest decline of 2.9 percent in electricity prices for the Denver-Boulder-Greeley census area, this drop in rates did not offset the 3.8 percent increase seen one year earlier. While global commodity prices have given Colorado energy consumers a brief respite (and wild fluctuations in prices), electricity generation and costs have proven less volatile.
“The energy index, which includes motor fuel and household fuels, decreased 19.0 percent from the second half of 2014 to the second half of 2015, following an increase of 0.3 percent in the same period one year ago. Falling prices for motor fuel (-26.0 percent), all of which occurred in the first half of the period, were largely responsible for the decline in the energy component. Lower prices for utility (piped) gas service (-18.9 percent) and electricity (-2.9 percent) also contributed to the decrease. During the same period one year ago, motor fuel costs declined 3.1 percent, while the indexes for utility (piped) gas service and electricity rose 5.8 and 3.8 percent, respectively,” the BLS report concluded.
Analysis from the earlier November report on residential electricity rates stands confirmed and, indeed, underscored:
It’s clear from the data that Coloradans’ income is not keeping pace with almost continuous electricity price increases over the past 15 years, consistently outpacing the rate of inflation. Colorado’s ratepayers have had to endure two economic recessions over that period, while feeling no relief from escalating energy prices driven by onerous regulations driving energy costs ever higher.
From fuel-switching and renewable mandates to other costly regulations imposed by state and federal agencies, Colorado’s ratepayers and taxpayers alike have been subject to policies that do not consider energy affordability or reliability as a primary concern. The most vulnerable communities–elderly, minorities, and the poor–are the most sensitive to even the smallest increases in energy costs.
Not to mention the state’s many business owners, including small business owners, who face the same hikes in energy costs that could force decisions like layoffs or relocation to nearby states, where energy costs are lower. This reduces job growth and harms the state’s economy twice, with increased business costs passed on to consumers–the same ratepayers who already are paying more at the meter.
Upshot: the data for the remaining sectors emphasizes the double impact that increased energy costs have in the form of rapidly escalating electricity rates on Colorado ratepayers, who see not only their own personal energy costs rise, but are hit a second time by commercial, industrial, and transportation charges that are “baked into” the cost of providing goods and services that are passed on to consumers.
William Yeatman, senior fellow of environmental policy and energy markets at the Competitive Enterprise Institute and author of the Independence Institute’s 2012 Cost Analysis of the New Energy Economy, said in the November report that given the current regulatory climate, things “could get much worse.”
Some of the costs already baked in to electricity prices came directly from policy initiatives undertaken in the last decade.
Yeatman analyzed 57 legislative items included in the push for a “New Energy Economy,” determining that as much as $484 million in additional costs were incurred by the state’s Xcel customers–an additional $345 per ratepayer.
“The best explanation for this confounding upward trend in utility bills nationwide is the Obama’s administration’s war on coal. Colorado, alas, was well ahead of the curve on the war on coal, which explains much of why the state’s rate increases are presently so much greater than the nationwide average,” Yeatman said.
Part of the war on coal, the Environmental Protection Agency finalized the Clean Power Plan in August 2015.
The policy battle over the EPA’s Clean Power Plan, and the future of Colorado’s electricity rates, rests upon multi-state legal challenges to the agency’s authority that just last week resulted in a stay from the U.S. Supreme Court. That decision was overshadowed, however, by the subsequent death of Justice Antonin Scalia days later, leaving the legal challenge in turmoil given the SCOTUS’ delicate and likely 4-4 ideological split and the contentious election year battle over nominations to replace Scalia.
Meanwhile, Governor John Hickenlooper remains committed to pushing for a “prudent” continuation of planning for Clean Power Plan implementation, with the Colorado Department of Public Health and Environment proceeding with its pre-stay timeline. Colorado Senate Republicans, however, called ignoring the court’s stay “unacceptable.” Legislation addressing CDPHE’s ability to proceed with CPP planning will likely be introduced before the end of the 2o16 Colorado legislative session.
The Independence Institute’s analysis of electricity costs, broken down by the other sectors, shows commercial electricity rates for Colorado have seen a 77.78 percent increase from 2001 to 2014, jumping from 5.67 cents per kilowatthour to 10.08 cents.
Industrial rates have tracked with the overall rate increase of approximately 67 percent, from 4.48 cents to 7.47 cents per kilowatthour.
Transportation figures from EIA data do not extend back to 2001. Instead, the trackable data begins in 2003, with a sharp decline by 2005, before prices more than doubled, from 5.01 cents to 10.79 cents per kilowatthour, or a 115 percent increase in the last full 10 years of EIA measurement.
Overall increases for comparison (with the adjustment for transportation noted):
For a complete description of EIA definitions of electricity consumers and data collection, click here.
President Barack Obama will be in Colorado today at Buckley Air Force Base promoting his new “all-of-the-above” energy policy. He’s delivering his remarks to a “closed audience” that includes “local energy stakeholders” (translation: rent seekers). We acquired a “fact sheet” about the President’s new direction for energy on which his speech will be based. Since most of us didn’t make the invite list, Michael Sandoval and I have taken the liberty of translating what this new approach to energy policy really means.
FACT SHEET: President Obama’s Blueprint to Make The Most of America’s Energy Resources
In his State of the Union Address, President Obama laid out a Blueprint for an America Built to Last, underscoring his commitment to an all-of-the-above approach that develops every available source of American energy. This commitment includes the safe and responsible production of our oil and natural gas resources.
Translation: We’ll pay lip service to the reasonable “all-of-the-above” energy advocates, but don’t worry anti-fossil fuel crowd. “Safe and responsible” are relative terms that are invoked to kill any oil and gas project that the green enthusiasts deem eco-unfriendly such as the Keystone pipeline.
Today, American oil production is at the highest level in eight years and last year we relied less on foreign oil than in any of the past 16 years.
Translation: production is high because of advancements in technology such as hydraulic fracturing and directional drilling not because this administration is a fan of fossil fuels. The drop in demand for imported oil is the consequence of a dismal economy and gas prices up 83 percent since the president took office.
At the same time, the President believes we need to double-down on clean energy in the United States. Transitioning to cleaner sources of energy will enhance our national security, protect the environment and public health, and grow our economy and create new jobs. Over the past few years, renewable energy use has nearly doubled. In fact, in 2011, the United States reclaimed the position as the world’s leading investor in clean energy – but staying on top will depend on smart, aggressive action moving forward.
Translation: Doubling-down on “clean energy” means an increase in importation of the rare earth minerals that comprise components in every major green technology—wind turbines, solar panels, and hybrid vehicle batteries. China controls 95 percent of the rare earth production, threatening national security. Chinese environmental regulations are virtually non-existent, failing to protect the environment in China or the public health of Chinese citizens, and produce tons of toxic waste trailings, radioactive debris, and millions of gallons of acid water—according to the Environmental Protection Agency’s August 2011 study, “Investigating Rare Earth Element Mine Development in EPA Region 8 and Potential Environmental Impacts.”
As for growing the economy and creating new jobs, the administration’s record is replete with examples of government-subsidized crony capitalist failures like Solyndra, or smoke-and-mirrors reports from “clean energy” advocacy firms. Actual government reports produced by Colorado’s Governor’s Energy Office and the Colorado Department of Labor and Employment detail the difficulty of actually defining “clean energy” jobs or tracing their creation.
The green job creation that is reported tends to be a product of the numbers promised by politicians and touted by industry advocates, not subject to objective standards of scrutiny, or remembered once the business venture fails. The administration touts the doubling of renewable energy use—well, when the figures provided from the Energy Information Administration (yes, it exists) show wind and solar composing just 1.3 percent of U.S. energy consumption in 2010, then yes, that growth can be overinflated. As for “investment” in “clean energy,” when it comes to government subsidies of any kind, the money comes from taxpayers domestically and from borrowing overseas, including China.
President Obama will begin the second day of his post-State of the Union swing with an event at a UPS facility in Las Vegas, focusing on the importance of American workers developing American-made energy for an economy that’s built to last. Following this event, the President will travel to Buckley Air Force Base in Aurora, Colorado to deliver remarks on American energy and the steps his Administration is taking to promote energy security.
Translation: The administration has been gambling with poor taxpayer “investment” in businesses like Solyndra, so Las Vegas makes sense.
President Obama’s Plan to Advance Safe Production of Oil and Gas Resources To Create Jobs, Enhance Energy Security, and Cut Pollution.
Translation: President Obama will expand his carbon footprint exponentially trying to explain his vision of American energy policy.
Make a new lease sale in the Gulf of Mexico to move forward on our national commitment to safe and responsible oil and gas development: In his State of the Union Address, the President directed the Department of Interior to finalize a national offshore energy plan that makes 75% of our potential offshore resources available for development by opening new areas for drilling in the Gulf and Alaska. On Thursday, the President will take a concrete step forward to develop our oil and gas resources, announcing that the Department of Interior will hold a new lease sale in the Gulf of Mexico. This lease sale will make approximately 38 million acres available, and could result in the production of 1 billion barrels of oil and 4 trillion cubic feet of natural gas.
Translation: Plans during an election year are flaky at best—and the likelihood of the administration abandoning key constituencies by eschewing previous calls for bans and moratoriums would be a true reversal of energy policy, and one unlikely to take place any time soon. We’ll check and see if that lease sale takes place, and whether or not those resources are allowed to develop or held up “indefinitely” pending more “clarification” or other environmental regulation impediments.
Promote safe, responsible development of the near 100-year supply of natural gas, supporting more than 600,000 jobs while ensuring public health and safety: In 2009, we became the world’s leading producer of natural gas. In the State of the Union, the President directed the Administration to ensure safe shale gas development that, according to independent estimates, will support more than 600,000 jobs by the end of the decade. These actions will include moving forward with common-sense new rules to require disclosure of the chemicals used in fracking operations on public lands.
Translation: We’ll give lip service to natural gas and hydraulic fracturing, but we really plan to appease our wealthy, elitist, eco-unreasonable donors and regulate fracking out of existence. The reality is that even small changes in environmental regulations surrounding fracking will lead to moratoriums and bans as companies fall afoul of disclosure requirements and other permitting processes freeze up.
Reducing our dependence on oil by encouraging greater use of natural gas in transportation: The President’s plan includes: proposing new incentives for medium- and heavy-duty trucks that run on natural gas or other alternative fuels; launching a competitive grant program to support communities to overcome the barriers to natural gas vehicle deployment; developing transportation corridors that allow trucks fueled by liquefied natural gas to transport goods; and supporting programs to convert municipal buses and trucks to run on natural gas and to find new ways to convert and store natural gas.
Translation: Son of “cash for clunkers.” We’ll force taxpayers to borrow even more to trash perfectly usable vehicles because we don’t like “dirty oil.”
Harnessing American ingenuity to catalyze breakthrough technologies for natural gas: The Advanced Research Projects Agency – Energy (ARPA-E) will announce a new research competition in the coming months that will engage our country’s brightest scientists, engineers and entrepreneurs to find ways to harness our abundant supplies of domestic natural gas to lessen our dependence of foreign oil for vehicles. The breakthrough technologies they will develop, whether they are for new ways to fuel our cars with natural gas or a method to turn that gas into liquid fuel, promise to break our dependence on foreign oil for our cars and trucks, allow us to breathe cleaner air, and ultimately save consumers at the pump. To date ARPA-E has hosted four rounds of competitions and attracted over 5000 applications from research teams, which has resulted in approximately 180 cutting edge projects.
Translation: part of our overall strategy to kill all fossil fuels by meddling with the natural gas industry.
The President’s Commitment to Clean Energy
Doubling the share of electricity from clean energy sources by 2035: The centerpiece of the Administration’s strategy is a Clean Energy Standard, or “CES” – a flexible approach that harnesses American ingenuity and innovation, and channels it toward a clean energy future. By creating a market here at home for innovative clean energy technologies, we will unleash the ingenuity of our entrepreneurs and ensure that America leads the world in clean energy.
Translation: We will continue to pick market winners and losers by force-subsidizing “clean energy” through CES standards designed to inflate the “demand” for expensive energy. These phony energy markets collapse—as we’ve seen time and again in Europe—once the government subsidies are removed due to financial collapse in EU countries like Germany and the Netherlands. Also, by artificially increasing our dependence on Chinese-produced rare earth minerals for all of the components critical to wind and solar energy production, we will be less about “clean energy” here at home than “dirty energy” somewhere else.
Supporting clean energy with targeted tax incentives: The President supports renewing and extending a number of proven and successful provisions that are crucial to the continued growth of the domestic clean energy sector. This includes tax incentives for clean energy manufacturing, which could create up to 100,000 jobs, and the Production Tax Credit to support investment in the deployment of clean energy technologies like wind and solar.
Translation: We don’t care if Solyndra and Evergreen Solar burned through taxpayer cash and went bankrupt because we love toxic solar panels and raptor shredding wind turbines. Despite billions of dollars already “invested” in green jobs, we’ve failed to produce many jobs, but we’ll continue to perpetuate the myth that we can waste taxpayer money and create “green” jobs at the same time. The notion that an entire industry—wind turbine energy production—will disappear without tax credits speaks to the fragility and lack of actual demand for that type of energy in a free market. Also, rather than “create” jobs, the tax credit would likely, at best, “save” the already subsidized jobs “created” through artificial demand as a result of Renewable Energy Standards and other government-imposed regulations.
Opening public lands for private investments in clean energy: To enhance energy security and create new jobs, the Department of the Interior is committed to issuing permits for 10 gigawatts of renewable generation capacity – enough to power 3 million homes – from new projects on our public lands by the end of 2012.
Translation: Environmental degradation doesn’t matter when it comes to “green”energy that is neither green nor clean. Each MW of wind-produced energy requires tons of rare earth minerals to build each turbine’s generator, and each ton of rare earths is accompanied by the aforementioned toxic waste, acid water, and radioactive trailings. Do the math. Once again, the administration seems to think, as does the American Wind Energy Association and other advocates that wind turbines spring pre-formed with the tapping of the ground, sprouting from bulbs like so many Dutch windmills. Nevermind the transportation costs and the sprawl required to house the wind farms or solar arrays. Or sensitive species like the lesser prairie chicken, whose existence could stall wind energy development in Oklahoma if it fails to garner an exemption in being listed as an endangered species. In the hierarchy of green, which will take precedent according to the administration—the endangered chicken or the wind turbine?
Securing renewable energy for the U.S. Navy: Securing a safe, clean and reliable energy supply for our nation’s defense forces is essential to carrying out missions vital to the security of the United States. The Department of Navy has committed to adding 1 gigawatt of renewable energy produced from sources like solar, wind, and geothermal to its energy portfolio for shore-side installations – enough to power 250,000 homes. Using existing authorities such as power purchase agreements, the Navy will ensure these energy projects are cost neutral and require no up-front investments by the government.
Translation: We’ll shift the up-front cost of acquiring energy through power purchase agreements to the taxpayers in some other fashion, most likely through the subsidies, tax credits, and other “investments” that create the energy sources in any producer’s energy portfolio. The Department of Defense has already begun to push for 25 percent renewable energy requirements by 2020, and to expand research into military applications of thin-film solar energy production. While we cut military spending in areas of troop size, we”ll actually spend more taxpayer money in the future because we want expensive, unreliable “renewable energy” that requires backup generation.
Note from the Energy Policy Center at the Independence Institute: We are agnostic on energy sources. We believe in affordable, abundant and reliable energy. Let consumers decide from which resource they would like to purchase their power.
While we welcome the president’s new approach of an “all-of-the-above” energy policy, actions speak louder than words. As we have detailed repeatedly, the policies of this administration have led to the massive waste of taxpayer dollars, increased environmental degradation, higher energy prices, and a dangerous dependence on China making American energy less secure than it was when he took office.
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:
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.
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 ,” two PUC Commissioners Baker and Binz, “had talked with natural gas interests about possible legislation and have been touting it since.”
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.