Growing transmission costs for wind-generated electricity have prompted Xcel Energy to seek approval for rate hikes to smaller utilities using Xcel’s transmission lines to reach their consumers:
Xcel wants the utilities to pay for its costs associated with having supplies of reserve power ready to go in case the wind suddenly dies, said Terri Eaton, Xcel’s director of federal regulatory and compliance efforts.
Currently, those costs are paid by Xcel’s business and residential customers, Eaton said.
If the transmission lines customers can supply their own back-up power supplies, they wouldn’t be charged under the proposed rates, she said.
Readily available, back-up power supplies are critical to keep the transmission grid in balance and avoid blackouts that can occur when a big source of power suddenly disappears, Eaton said.
Xcel’s hikes would hit rural cooperatives and other utilities should the Federal Energy Regulatory Commission approve the rate hike at the beginning of 2015.
But what, exactly, does Eaton mean when she refers to “reserve power ready to go in case the wind suddenly dies”?
“We’ve seen some dramatic wind fall-offs in really short periods of time,” Eaton said.
Xcel has already experienced such falls offs, when “several hundreds of megawatts of wind” drops dramatically — and swiftly — due to changes in the wind, she said.
“Sometimes the wind is just howling, and an hour later the wind has calmed — and it’s in those circumstances that we need to have reserves available to pick up the load,” Eaton said.
In such cases, backup power supplies typically come from natural gas-fueled power plants, she said.
The tariff proposed by Xcel would help cover the costs when the wind “suddenly dies.”
The intermittency of wind has been widely discussed, and no amount of forecasting or improved efficiency will spin a wind turbine’s blades if the wind isn’t blowing.
In 2012, a study examined wind generation in Illinois at the height of a summer heat wave, when energy demands rise to yearly highs. The author found that just 5 percent of installed wind capacity was available during that outbreak of record temperatures, and at times, “virtually nonexistent.”
Earlier this year, wind energy proponents touted the example provided in Texas–wind had saved the day. But a closer examination of the figures from the Electric Reliability Council of Texas (ERCOT) demonstrated that contrary to claims that wind had bailed out conventional sources of electricity by ensuring grid reliability, wind had actually fallen so substantially that Texas turned to other sources to meet the extra 1,000 megawatts of demand on January 6. Both scheduled and unscheduled plant closure elsewhere had left Texas with a gap during a record cold snap, a gap that wind was unable to fill.
As the Institute for Energy Research wrote in January, only 3.2 percent of the energy needs of the Texas grid operated by ERCOT came from wind, while 83 percent of Texas wind turbines “were unavailable during peak demand.”
ERCOT itself continues to rate its “wind power at 8.7 percent of its installed capacity” for 2014 during the periods of highest demands, which typically occur in mid-to-late summer. For nearly 12,000 megawatts of installed wind capacity, only 990 megawatts are considered reliable for forecasts computed by ERCOT for 2014. That’s like having the equivalent of 12 1,000 megawatt power plants built and only 1 online when summer energy demand spikes.
As a percentage, ERCOT figures wind to provide just 1.3 percent of the total amount of energy it needs this summer, rising to 2.2 percent by 2017 according to its own projections.
As for Colorado, under Senate Bill 252, rural cooperatives must reach 20 percent renewable energy by 2020.
Tri-State Generation and Transmission Association spokesman Lee Boughey acknowledged the rising costs of integrating ever-greater amounts of intermittent energy supplies like wind.
“As more intermittent resources are added in the region, we understand the need to address the higher costs of integrating and balancing power,” Boughey told the Denver Business Journal.
Those costs were highlighted in a March post that examined the integration of wind and other intermittent energy sources to the reliability of the grid operated by Public Service and regulated by the Public Utilities Commission (PUC), under the state’s preferred energy mandate:
The concern over infrastructure costs and the cost to ratepayers, as well as the challenge of incorporating ever-larger amounts of intermittent generation sources like solar and wind, is not a new topic at the PUC.
In June 2012 comments by PUC staff engineer Inez Dominguez indicated that off-peak load and wind generation in particular was “alarming.”
The integration of intermittent sources like wind would overwhelm the system, either with higher costs or decreased reliability. Bringing in wind and curtailing conventional, coal-fired generation during off-peak periods would result “in an economic penalty to the Public Service customers because more expensive wind generation would be supplying their load.”
Cutting off the wind, however, would also penalize ratepayers, as the “take or pay” agreements give wind first priority.
But the Public Service engineer also highlighted reliability concerns. “In its simplest terms as it concerns the customers, reliability deals with keeping the lights on. This reliability issue may occur when the wind suddenly stops blowing and a significant amount of wind generation is lost to the balancing authority,” Dominguez said.
“When this event happens, the balancing authority needs to replace the lost generation quickly enough to keep from tripping off the load. This means that the generation in reserve to cover such an event has to be quick enough in its response to cover the lost generation,” Dominguez continued.
For Colorado ratepayers, this backup generation comes from “gas fired combustion turbine generation reserves” that displace “more economic base load coal fired generation,” only adding to the cost, and “complexity” of the load balancing requirements.
According to Dominguez, these examples suggested a “flag that Public Service may have too much wind generation.”
Filed under: New Energy Economy, preferred energy, renewable energy, solar energy, wind energy
By Amy Oliver Cooke
“Giving society cheap, abundant energy would be the equivalent of giving an idiot child a machine gun,” wrote environmental doomsday prophet Dr. Paul Ehrlich in 1975.
That’s a cruel statement directed at people who simply want electric lights so their children can read at night, a refrigerator to keep food from spoiling, or a heater to keep their homes warm during the winter.
Yet it seems to be the approach of Colorado’s environmental Left. Part of the problem is progressive leaders’ extremely narrow definition of “clean” energy that limits resource choices to more costly and unreliable wind and solar.
In 2004, Colorado voters approved Amendment 37, requiring Xcel Energy and other investor-owned utilities to use preferred sources such as wind and solar for 10 percent of the electricity sold to end users.
Since then the Colorado legislature has mandated increases in the renewable (or preferred) energy standard, from 10 to 20 to the current 30 percent by 2020. Only Maine (40 percent by 2017) and California (33 percent by 2020) have more aggressive mandates. They also have higher electric rates than Colorado.
Last year the state legislature passed SB 252, a 20 percent preferred energy standard on Colorado’s rural electric cooperatives. Now nearly the entire state must pay for a significant percentage of electricity produced predominantly from preferred “clean” sources wind and solar.
Since producing electricity from wind and solar is more expensive, Colorado’s electric rates have gone up along with the legislature’s mandates.
Not too long ago, our state enjoyed some of the cheapest electricity in the United States. In 2000, Colorado’s residential rates were 7.31 per kWh, equivalent to 9.89 cents in 2013 dollars. Instead, Coloradans now pay 11.91 cents per kWh for residential electricity, the highest rate in the Mountain West. California, Alaska, and Hawaii are the only Western states with higher residential rates.
Colorado’s electric rates are rising significantly faster than in most states. Last year rates across the U.S. increased on average 2.4 percent, compared to a 4.5 percent jump here.
These high rates couldn’t come at a worse time. Just this week the Denver Post reported that Colorado’s labor participation rate has fallen 6 percentage points since 2006, to its lowest level (67.3 percent) since 1976.
In addition, the number of Coloradans obtaining assistance from food stamps continues to mark all-time high numbers, Complete Colorado reports.
The second week of February saw a 42 percent increase in Coloradans asking government for help paying their heating bills, according to 9News.
The state legislature had an opportunity to modestly improve the situation. Rep. Lori Saine’s (R-Weld County) HB 1138 would have expanded the definition of “clean” energy to include hydroelectricity.
Under HB1138 many electric co-ops that serve Colorado’s rural communities could have met or at least come close to meeting SB 252’s increased mandate. Without the expanded definition, some co-ops will need to build additional capacity and expensive transmission lines, or purchase renewable energy credits from other providers. Some of Colorado’s poorest counties will bear the costs.
Despite HB1138’s bipartisan sponsorship, lobbying from the wind and solar industries and their advocates in the environmental non-profit world doomed the bill in committee.
Progressive state lawmakers’ definition of clean energy is also unique. Many states, including those in the eco-friendly Pacific Northwest, the Center for American Progress, the Environmental Protection Agency, and our own Colorado Energy Office all consider hydro to be a clean, renewable source.
Our state’s extremely narrow definition of clean energy begs the question of whether progressive lawmakers simply seek to protect the wind and solar industry at the expense of ratepayers.
A 2012 Independence Institute study showed Xcel Energy ratepayers spent $343 million to comply with the preferred energy mandate, much of which ended up as surplus because supply exceeded demand. That’s $245 per ratepayer, nearly two months of average Colorado electricity bills, for electricity they didn’t use.
Affordable power is not mutually exclusive of clean power. Colorado should expand the definition of clean resources to include clean coal, natural gas, hydroelectric, and nuclear. We also should encourage a least cost principle and let consumers decide.
Anything else is just cruel.
This opinion editorial appeared originally in the Greeley Tribune on February 20, 2014.
Conventional wisdom would believe that Investor Owned Utilities (IOUs) such as Xcel Energy would have lower electric rates than Rural Electric Associations (REAs) and Municipally Owned Utilities (MOUs) because IOUs have the advantage of population density that allows for maximization of capital investment.
Average residential bill/cost of 700 KWh
Average small commercial bill/cost of 2,000 KWh + 10KW
Average large commercial bill/cost of 45,000 KWh + 130KW
Average industrial bill/cost of 1,900,000 KWh + 3,000KW
These figures beg a couple of questions to which I don’t have definitive answers but do have very strong suspicions:
- Would the IOUs’ bills have compared more favorably before the 30 percent renewable mandate and before the Public Utilities Commission moved away from a least cost principle?
- Is Colorado’s largest IOU Xcel Energy worried that REAs and MOUs provide electricity at lower costs? If not, it should be. As electric rates continue to rise, businesses looking to reduce their costs may move out of Xcel service areas and into an area served by an REA or MOU. It already produces surplus electricity as it is.
According to Xcel Energy’s regulatory filings, the utility spent $275 million in ratepayer subsidies for customer-sited solar panel systems from 2008-2012.*
That breaks down to:
Cost of these solar subsidies for each of Xcel Energy’s 1.4 million Colorado customers.
Percentage of Xcel Energy customers (approximately 9,200) that benefit from lower electricity rates by having subsidized solar panels installed on their property. Although only a fraction of 1 percent of Xcel Energy customers benefit from solar subsidies, 100% of customers pay for the cost of these subsidies.
Cost in Xcel Energy ratepayer subsidies for each of the 3,600 employees that work “throughout the value chain” of Colorado’s solar industry (job numbers are from the Solar Energy Industries Association).
Capital cost per kilowatt capacity of the solar panels subsidized by Xcel Energy ratepayers.** This compares to $2,040/kilowatt for the 750 megawatt Comanche 3 coal-fired power plant in Pueblo,*** and $1,400/kilowatt for a combined cycle natural gas plant.
*See page 1, final column of Xcel Energy, December 2012 RESA budget Report, filed 2 February 2013.
**Capacity of Xcel Energy’s distributed generation solar panel assets—44.9 megawatts—was taken from Section 2.11 of the Technical Appendix to Xcel Energy’s 2011 Electric Resource Plannb (page 341).
***The Comanche 3 cost data is derived from following assumptions: Capital cost–$1.3 billion; and capacity 637 megawatts (85% capacity factor of 750 megawatt nameplate capacity).
Despite close to seven hours of testimony on SB13-252, a bill to raise the renewable energy mandate 150 percent on rural electric co-ops, it is very clear that the bill’s prime sponsors Senate President John Morse (D-Colorado Springs) and Senator Gail Schwartz (D-Snowmass) do not understand their own bill and didn’t bother to consult those who can comprehend the complexity of this legislation. It passed out of committee on a party line vote.
The bill was heard yesterday in the Senate State, Veterans, and Military Affairs Committee. Members include:
- Senator Angela Giron, Chair, (D-Pueblo) and a bill sponsor
- Senator Matt Jones, Vice-Chair, (D-Louisville) and a bill sponsor
- Senator Ted Harvey, (R-Highlands Ranch)
- Senator Evie Hudak (D-Westminster)
- Senator Larry Crowder (R-Alamosa)
What the sponsors say it will do:
- Imposes a mandate on rural electric co-ops forcing them to get 25 percent of the electricity they supply to members from government-selected “renewable” sources, such as wind and solar by 2020.
- Removes the in-state preference for the 1.25 kilowatt-hour multiplier.
- Expands the “renewable” sources to include coal-mine methane and municipal waste.
- Increases the retail rate impact from 1 to 2 percent, which Sen. Giron calls “acceptable.”
What the bill really will do:
- Despite no projected fiscal impact to state government, it will cost co-op members anywhere from $2 billion to 4 billion, more than $8,000 per meter, including those in 10 of Colorado’s poorest counties.
- Removes the in-state multiplier because current law is unconstitutional. The state is being sued over it and doesn’t want to lose, which would force the state to pay attorney’s fees.
- Drive jobs out of the state because of high electricity costs.
- “Blow up the electric co-operative business model.”
- Likely force the state to spend taxpayer money defending this new law in court.
- Devastate rural economies.
- Drive up the cost of business for Colorado’s farmers and ranchers at the same time they are suffering through a devastating drought.
- Force co-ops to try to comply with a law that well could be a “physical impossibility.”
- So many people showed up to testify that the hearing had to moved to a larger room, and still an over-flow room was needed to accommodate the crowd
- Neither Senator Morse nor Schwartz could answer basic questions about the rate cap and indicated the committee would hear from “experts” who could answer questions.
- All three Moffat County Commissioners showed up to testify against the bill.
- Tri-State Generation, wholesale power supplier owned by co-ops, and every electric co-op that testified stated they were not consulted at all regarding the bill despite their repeated attempts to engage with sponsors once they heard legislation would be coming.
- Bi-partisan opposition
- Partisan support
- Senator Harvey was the best-prepared legislator.
Below are highlights and lowlights of SB252 testimony.
Forced to admit:
Senator Harvey asked Senator Morse if the electric cooperatives were ever consulted regarding SB 252. Morse couldn’t say, “yes,” so he answered with a long-winded “no.”
Former Public Utilities Commission (PUC) Chairman Ron Binz, who resigned under the cloud of an ethics complaint, acknowledged that Xcel Energy may well benefit by selling “renewable energy credits” (RECs) to Colorado’s rural co-ops in order for them to comply with this law.
Senator Ted Harvey asked several supporters of SB 252 if they would support the 150 percent mandate increase if they didn’t benefit directly from the bill. The answer: “No.”
Senator John Morse stated if the “market” wanted a renewable mandate we would have one. But since the market doesn’t, government must force it.
Supporter and former state representative Buffy McFadden, current Pueblo County Commissioner, said she wasn’t sure if renewable energy would “go to market” if government didn’t force it.
“Two percent rate cap” comes under fire:
Senator Harvey asked sponsors to explain the two percent rate cap. They couldn’t.
Under pressure from Senator Ted Harvey, PUC Executive Director Doug Dean struggled to explain the total cost of the Colorado’s renewable energy mandate and the two percent rate cap. Dean finally acknowledged that the two percent rate cap only applies to “incremental costs,” and followed up with “it’s pretty complicated.”
Binz perpetuates the 2 percent rate cap myth. Says in testimony, “as an officer of the state,” the PUC and Xcel do not mislead the public on the cost of renewable energy.
Four hours later, Independence Institute energy policy analyst William Yeatman directly addresses Binz’s misleading characterization of how Xcel recovers the total cost of the renewable energy mandate. Yeatman clarifies using real numbers: two percent of Xcel’s retail electric sales in 2012 was $53 million, which was captured in the Residential Electric Standard Adjustment (RESA). Another $291 million, not subject to the rate cap, was captured through the Electric Commodity Adjustment for a total of $343 million or 13 percent of retail sales.
Senator Harvey asked Yeatman to explain how the PUC allows this. Yeatman responded that the budgetary trick was likely the result of a dichotomy between PUC staff that acknowledges the public may be “laboring under the misapprehension of a two percent rate cap” and the Commissioners who allow it to occur.
Rich Wilson, CEO of Southeast Colorado Power Association, to bill sponsors: “you just blew apart the non-profit electric cooperative model.”
International Brotherhood of Electrical Workers pleads with the committee “don’t pass this bill.”
Kent Singer, Executive Director of Colorado Rural Electric Association (CREA), to bill sponsors and supporters, “even after five hours of testimony, I don’t think you have a clear picture of how this [SB252] works.”
Singer continues, had sponsors come to us, we could have explained it, but they NEVER did.
Singer: two percent rate cap is far more complicated than Ron Binz would lead you to believe.
Dan Hodges, Executive Director of Colorado Association of Municipal Utilities, responding to inquires about why Senator Morse would exclude his own utility owned by the city of Colorado Springs: the state constitution excludes municipal utilities from state regulation because they are owned by their citizens. “it’s unconstitutional” to draw municipals into this…”I don’t think it is appropriate for rural electric cooperatives to be drawn in either” because they are owned by their members.
Binz belittles non-profits cooperatives and their members: “Tri-State [Generation] doesn’t have the state’s interest in mind.” Tri-State is owned by electric cooperatives, which, in turn, are owned by members. Most of those members are rural Coloradans.
Senator Gail Schwartz said her neighbors in Aspen and Snowmass want more options for and access to renewables such as solar panels. My question: Why don’t they just pay for it?
Dave Lock, Senior manager, government relations for Tri-State, addresses Binz, “you can be damn sure Tri-State cares about Colorado.”
Lock responding to Binz’s disbelief about Tri-State’s $2-4billion analysis. “We only had five days,” which included a weekend because we were never allowed at the table.
Moffat County Commissioner Tom Mathers, “I own a bar. I’d like to mandate that everyone drink 25 percent more.”
John Kinkaid of Moffat County “we aren’t contributing to your [Denver’s] brown cloud.”
War on Rural Colorado:
All three Moffat County Commissioners John Kinkaid, Tom Mathers, and Chuck Grobe echoed the theme that SB 252 is an assault on rural ratepayers and equivalent to “war on rural Colorado.”
Norma Lou Murr, a Walsenburg senior citizen on a fixed income, waited patiently for hours to testify. When her turn finally came, she asked the committee “to look very seriously” before raising her electric rates.
The way the state legislative Democrats are handling this legislation is similar to how they handled gun control – leave those most impacted out of the conversation and then completely ignore their concerns during testimony.
By Brandon Ratterman
Colorado is having trouble defining hydroelectricity. The Environmental Protection Agency (EPA) considers it to be a renewable resource, and the Colorado Energy Office calculates hydroelectric power’s emission rate as equal to wind and solar. Despite these two distinctions, Colorado’s renewable energy standard defines hydroelectricity as renewable only if the generating facility is newly constructed with a capacity of ten megawatts or less, or constructed before January 2005 with a capacity of thirty megawatts or less.
Colorado has 1169 megawatts (MW) of existing hydroelectric capacity. Of that total, 82 percent is generated at facilities with a capacity over 30 MW—meaning it is not “renewable” unless the facility was built in the past eight years. Unfortunately, most facilities do not meet this requirement
According to the most recently released figures, renewables other than hydro produce 9.8 percent of the total net summer electricity capacity. If the total 1169 MW of existing hydro capacity were considered renewable, hydroelectricity would contribute another 8.5 percent of capacity. Instead, only 4.8 percent of hydroelectric power is considered renewable.
Under the current format Colorado will have to fill renewable portfolio standards largely without the help of hydroelectric generation. Unfortunately, this is increasing the costs of the renewable portfolio standard.
At 11.06 cents per kilowatt-hour, Colorado ranked 21st highest nationally in average residential electricity rates according to the U.S. Energy Information Administration. That may not sound too bad, except that the state is well above the average for all Mountain West states. In fact, Colorado has the second highest rates in the Mountain West, just behind Nevada, which actually saw a decrease last year in its residential electric rates.
Furthermore, Colorado has higher rates than any of its neighboring states. Outside of the East Coast, the only states with higher rates than Colorado are Michigan, Wisconsin, Nevada, California, Alaska and Hawaii.
As was proved in the 2012 snapshot of Colorado’s new energy economy, these high prices are due largely to lawmakers using the RPS to support the wind and solar industries. In 2012 alone Xcel Energy customers paid an extra $343 million for what ended up being mostly surplus electricity.
If high prices are the intent of Colorado’s energy policy, expect those figures to get much worse in the coming years as the state moves closer to the legislative mandate of 30 percent renewable portfolio standard, which is heavily tilted toward wind. However, if self-described environmentalists and the Colorado Energy Office truly care about the environment and economic sustainability then they should embrace hydroelectric power regardless of when it was built, but don’t hold your breath waiting.
By Peter Blake
This column appeared originally on Complete Colorado Page 2.
When the runners are closing in on the finish line, move the tape farther back.
That’s the usual strategy employed by greens when it comes to establishing renewable energy standards for electricity production. It’s a marathon that never ends, and the added cost to consumers is secondary, if not irrelevant.
Colorado’s power producers are awaiting introduction of a bill that would raise the minimums yet again. But their lobbyists don’t know the details — and neither does the prospective sponsor, apparently.
There’s plenty of “radio chatter,” said Jeani Frickey, a lobbyist for Colorado’s rural electric associations, but “we don’t have anything specific yet.”
“I’ve not seen any bill drafts, or even outlines of ideas,” said Mike Beasley, an Xcel Energy lobbyist.
An aid to Rep. Su Ryden confirmed that the Aurora Democrat is going to be a sponsor of a bill, but even she hasn’t seen it. “A lot of different people” are still working on the bill.
The ever-rising renewable standards began back in 2004, when Colorado voters approved Amendment 37, an initiative that required regulated, investor-owned utilities to produce 10 percent of their electricity through renewable energy by 2015.
Three years later the legislature, assuming that one popular vote gave them carte blanche to do the work themselves from then on, raised the minimum to 20 percent by 2020. At the same time it established a 10 percent mandate on REAs, co-ops, which are not under the Public Utilities Commission.
In 2010 lawmakers raised the minimum to 30 percent for regulated utilities by 2020. The REAs were left at 10 percent. Now it’s three years later, again, and history tells us that lawmakers will be back with yet higher standards.
Some predict the figure will go to 40 percent for Xcel and Black Hills Energy, and 20 percent for the REAs. Others believe that only the REAs will be raised. But they’re only guesses, and the figures could be adjusted during the legislative process anyway.
By the way, you might think that hydroelectric power would count as a renewable, since no fuel is required and it produces, as Frickey noted, “zero greenhouse gas emissions.”
But Colorado enviros refuse to recognize water power as a renewable. Perhaps they’re afraid it would lead to the damming of various rivers. But if it did count, the REAs would already be over their required 10 percent just using existing dams. Tri-State Generation & Transmission, which supplies 18 of Colorado’s 22 REAs with electricity, gets 12 percent of its power from water, said Tri-State spokesman Lee Boughey. It’s generated by the Western Area Power Administration, an agency of the Energy Department.
REAs would be a natural target for the Democratic-controlled legislature. They cover 73 percent of Colorado’s land but less than 25 percent of the state’s population, said REA lobbyist Geoff Hier. Democrats predominate along the Front Range, where Xcel provides most of the power, and Republicans in the hinterlands.
One group working on the bill is Conservation Colorado, a recently formed amalgam of the state’s Conservation Voters and its Environmental Coalition.
Last September, before the merger was formalized, the leaders of the two groups wrote a letter to legislative candidates urging their support for “Colorado’s Path to a Clean Energy Future.” [Read entire letter below]
They seemed to be targeting the REAs. Noting that Xcel has a 30 percent mandate, “most rural and municipal energy providers have only made a 10 percent commitment that is below the national average,” says the letter. It went on to blame coal plants and autos for air pollution and urged a four-point program:
- “Decreasing the emissions that cause climate change” by at least 2 percent a year;
- Ensuring that “over a third” of Colorado’s electricity comes from renewable technologies;
- Requiring all utilities to offer “energy efficiency” programs that will help customers save energy.
- Encouraging the installation of charging stations for electric vehicles.
- Senate Bill 126, now in the House, would help promote the last point.
It’s hard to predict how Xcel or the REAs will react when a bill is finally introduced. In 2004, Xcel fought the first mandate. But then the greens got smart and stopped treating it as an evil corporate enemy while Xcel came to realize its job was to make money, not provide cheap power. It’s entitled to 10 percent return on investment, no matter what the cost of fuel or capital equipment.
The PUC helped by no longer requiring utilities to apply the “least cost” principle when building facilities or buying fuel. What’s more, the PUC made retail fuel prices subservient to more nebulous environmental goals.
Xcel ended up backing the 2010 bill, just as the REA’s backed the move to 10 percent renewable for them.
If renewables were economically competitive in the marketplace, there would be no need for legislation. Utilities would turn to them automatically. But so far, they’re not. Wind survived only because Congress belatedly extended its special tax credits. Solar is even less competitive.
Xcel already is allowed to charge you an extra 2 percent per month to pay for its renewable facilities and fuel.
Three years ago, when Bill Ritter was still governor, a coalition of natural gas companies, Xcel and greens worked behind closed doors for months before dropping House Bill 1365 into the hopper on March 15. It required Xcel to close down three coal-fired plants or convert them to natural gas by 2017. It was then rushed through the legislative process in a couple of weeks as more than 30 lobbyists worked the halls.
A similar rush-rush process recently worked for the gun bills. Perhaps it will be tried again when the renewable energy bill is introduced.
Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at firstname.lastname@example.org
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.
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
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.
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.”