December 17 Colorado Energy Cheat Sheet: Environmental ‘Propaganda’ Agency; electric rate hikes called ‘discrimination’; anti-energy activists promise to ‘ratchet up’ efforts
Filed under: CDPHE, Environmental Protection Agency, Legislation, New Energy Economy, regulations, renewable energy, solar energy, wind energy
Some commodity pricing is giving Colorado Xcel ratepayers a temporary reprieve from escalating energy costs:
Xcel said the new rates will result in “significantly lower bills, particularly for natural gas customers, for the second half of the current winter heating season.
“Compared on a year-to-year basis to better gauge the seasonal impacts of weather, both residential and small-business customers’ (natural gas) bills will be approximately 21 percent lower next quarter, when compared to the first quarter of 2015,” Xcel said.
Electricity bills are expected to drop about 5 percent compared to the current quarter, the utility said.
For the most part, Xcel passes changes in commodity prices, and the change in costs associated with supplying power and natural gas, along to customers on a dollar-per-dollar basis.
Commodity prices fluctuate, but the downward trend will be welcome for as long as it sticks around, or until it is offset by higher energy costs elsewhere, due to expensive replacement of baseload power with exotic, renewable energy sources.
The next legislative session should feature quite a few oil and gas battles, with one Democratic State Representative queueing up a bill to attack natural resource producers:
State Rep. Joe Salazar, D-Thornton, plans to introduce a bill in the upcoming legislative session that would force oil and gas companies to compensate residents for any loss in property value tied to drilling activities, including damage done by earthquakes linked to deep-earth wastewater injection wells. But state Sen. Jerry Sonnenberg, R-Sterling, has vowed to block the measure in the Senate.
“If it comes to my committee, I’d do everything I can to make it go away,” Sonnenberg said. “Quite frankly, it’s another serious attempt to run oil and gas companies out of business in Colorado… Everyone knows the pro- oil-and-gas bills go to the House to die and that the anti- oil-and-gas bills go to die in the Senate.”
That’s the response Salazar said he expected.
“This shouldn’t be a politicized fight,” he said last Saturday at a Thornton town hall he convened on the issue. “I believe we (in state government) need to give up some of the power to local governments. They need to be able to police these industries in their area.”
The benefit of a divided legislature is that extreme bills like this will likely not make it too far in the opposing chamber. But the bill will still be heard, and we expect some rhetorical fireworks over legislation similar to this.
Anti-energy activists in our state plan to “ratchet up” their efforts beyond legal means in the near future:
The leader of a national activist organization behind ban-fracking campaigns in Colorado, Ohio and elsewhere is calling on activists to “ratchet up” civil disobedience and begin “filling up jails.”
The comments are from Thomas Linzey, founder of the Community Environmental Legal Defense Fund (CELDF) in an interview he did with Chris Hedges’ Days of Revolt. From the interview:
HEDGES: “Well, you have talked about it as a kind of military operation. Explain what it would look like.”
LINZEY: “Well, I think it means thinking about civil disobedience differently than we’ve thought about it before. So it’s not just to make a moral or ethical statement; it’s actually aimed at stopping the project itself. And that means, I think, successive days. It means rotating people through. It means bringing people in from other places. It means filling up jails.” (emphasis added)
Linzey went on to suggest that the law isn’t really important here:
“I mean, our resistance has to ratchet up, the opposition has to ratchet up our stuff to a point where it’s actually actively interfering with these projects, because if you don’t do that and you rely entirely on the legal process and the legal process is so stacked against you in terms of what municipalities can and can’t do, that at that point you have no other option but to engage in that type of action.” (emphasis added)
Growing frustration on the part of anti-energy activists seems to be fueling (pun intended) a sense of urgency. We hope this amounts to nothing more than bravado, but hope that Colorado’s natural resource developers–our neighbors–stay out of harm’s way.
The Environmental Protection Agency? How about the Environmental Propaganda Agency–says the Government Accountability Office:
Yesterday the Government Accountability Office issued a report concluding that the Environmental Protection Agency (EPA) violated federal law in its use of social media to promote its controversial “WOTUS rule,” redefining the scope of the “waters of the United States” subject to federal regulation under the Clean Water Act. Specifically, the GAO concluded that the EPA violated express limits on the use of appropriations for indirect or grassroots lobbying, and that in doing so, the agency violated the Antideficiency Act.
According to the GAO, the EPA used various social media platforms, including Thunderclap, to develop support for its proposal to expand and clarify the scope of its own regulatory jurisdiction and combat opposition to the rule. The EPA also used social media communications to promote materials supporting the WOTUS rule by environmentalist advocacy groups, including materials that were clearly designed to oppose legislative efforts to limit or block the rule. The GAO labeled these efforts “covert propaganda.” The New York Times had previously documented some of the EPA’s actions.
Good legislation is often larded with bad–pork, paybacks, and wheeling-dealing that makes the whole thing a whole lot less palatable–and the proposed extension of the wind production tax credit and the investment tax credit for solar has the renewable industry singing the praises of the proposed lifting of the oil export ban:
Michael Zarin — head of external communications for Vestas — said via email that the company is “pleased” by the proposed extension.
“As currently structured, the extension and phase-out plan would give the industry the longer-term certainty that we’ve been seeking,” Zarin said. “Together with wind energy’s natural competitiveness against other power generation sources, the PTC extension agreement would help ensure a solid future for wind energy in the U.S.”
The solar industry’s investment tax credit, currently a 30 percent credit for commercial, residential and utility-scale solar power systems, also would be extended and phased down through 2022 under the proposal.
The credit, as proposed, would stay at 30 percent through 2019, and then fall to 26 percent in 2020. It would drop to 22 percent in 2021 and 10 percent in 2022. The bill also offers a commence-construction clause that would extend the credit to any project in development started before the end of 2021 and be finished before the end of 2023.
“We are delighted a five-year extension of the Investment Tax Credit has been included in the omnibus bill,” said Rebecca Cantwell, executive director of the Colorado Solar Energy Industries Association. “We worked hard to get it included, and are working hard to make sure it passes.”
Mining for a photo-op to discuss the fallout of the EPA’s Gold King Mine spill:
IDAHO SPRINGS – The first-ever congressional hearing inside a mine was held Monday, offering a dramatic image of the impact the Gold King Mine spill has had on policy talks.
The Subcommittee on Energy and Mineral Resources held its field hearing inside the Edgar Mine in Idaho Springs, where the panel discussed legislation aimed at training and recruiting engineers to work on mining reclamation efforts.
“This is weird,” said U.S. Rep. Rob Bishop, R-Utah, chairman of the House Committee on Natural Resources, who made his remarks while wearing a hard hat and looking up at rock formations inside the mine, which is used for training by the Colorado School of Mines.
Discussions around mining reform gained momentum after the August Gold King Mine spill, in which an estimated 3 million gallons of old mining sludge poured into the Animas River, turning it a mustard-yellow. The river tested for initial spikes in heavy metals.
Efforts to increase electricity rates in the southwest part of the state were sustained, as a measure to push back failed, with opponents of the rate hike calling the residential-focused increases “discrimination”:
An effort to reverse a decision last month to increase residential electric base rates failed at the La Plata Electric Association’s meeting on Tuesday with a split 6-6 vote.
In November, the board approved on a 6-5 vote a new rate structure that will cost local residents about $5.25 more per month on their electric bills, based on usage. Commercial and industrial users will see an estimated 4 percent decrease on next year’s bills.
However, Tuesday’s main point of contention was last month’s decision to raise the residential base rate from $20.50 to $21.50 a month, which had several board members concerned that the increase would “exacerbate inequality” in the region.
“If we continue to do this, we are harming and discriminating more and more against our members,” said board member Jeff Berman in reference to the 60 percent increase in base charges over the last five years. “I cannot support a base charge increase that exacerbates inequality and discrimination.”
“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.
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.
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.
For all the ink that Colorado’s public officials have spilled on the subject of the New Energy Economy, there’s been little discussion of its cost.
Ex-Governor Bill Ritter, for example, recently took to the pages of the New York Times to brag about his energy legacy. While he made an unsubstantiated claim about creating “thousands of new jobs,” he ignored the inconvenient truth that Xcel’s rates increased precipitously during his tenure, despite the fact that electricity demand was down due to an economic recession.
To be sure, it’s difficult to isolate an annual cost figure for the New Energy Economy. For starters, there’s a lot of policies to investigate; as ex-Governor Ritter noted in his New York Times op-ed, he enacted a suite of expensive energy policies (57 laws, to be exact). Moreover, utility accounting is arcane and largely opaque. So discerning the sum cost of these disparate measures is not easy, which is why no one has yet calculated the annual cost of the New Energy Economy…until now.
In a recent post, I explained how Xcel maneuvers around the 2 percent annual rate cap on green energy spending. In a nutshell, the utility avoids the rate cap with accounting tricks that function to underestimate the cost of renewable energy and overestimate the cost convention energy. Thus, Xcel suppresses the annual “incremental cost” of green energy, which is subject to the rate cap, by millions of dollars.
Unfortunately, Xcel’s green energy cost accounting is even more suspect that I had originally thought. That’s because the Public Utilities Commission, in Decision No C09-0990, allows Xcel to “lock down” ongoing incremental costs of renewable energy sources for five years after they are obtained. As a result, the budgeting tricks adumbrated above (and explained in detail here) are “locked in” for half a decade.
Absent this loophole, each year the PUC would review the actual ongoing costs of green energy; with it, the PUC essentially takes Xcel at its word. To riff on a popular phrase, the PUC’s approach is to “trust, but don’t verify.”
In addition to being cost-effective—even by solar power’s expensive standards—Xcel’s controversial Solar*Rewards subsidy program is also regressive. That is, it’s a subsidy for the rich, borne disproportionately by the poor.
Elsewhere, I discuss how Solar*Rewards program, a far-too-generous subsidy for the installation of solar photovoltaic panels, became a political hot potato in Colorado (for a detailed primer, see here; for more accessible explanations, see here or here). Suffice it to say, Xcel is seeking to curtail solar subsidies, because they cost a lot of money but produce only a little electricity. To wit, Xcel ratepayers are expected to this year pay almost 4 percent of their bills (about $100 million) on the Solar*Rewards program, in order to obtain about half a percent of its electricity. That’s a bad deal.
But it’s actually worse than a bad deal. That’s because solar panels, like electric cars, are almost exclusively the play-things of the well-off. Even after the (roughly) $10,000 ratepayer subsidy, a Solar*Rewards applicant must pony up another $10,000 to pay for the other half of what it costs to install the panels. Only the upper class has this sort of money to put to something as frivolous as solar panels.
Under Colorado’s Renewable Electricity Standard, investor-owned utilities in Colorado must generate 12 percent of their electricity from renewable energy this year. The requirement was 5 percent last year. By 2020, it is 30 percent.
Renewable energy sources like wind and solar cost more than conventional energy sources like coal and gas, but Colorado lawmakers sought to protect ratepayers by limiting the annual retail rate impact of the green energy mandate to 2 percent of a customer’s bill.
Elsewhere, I’ve described how Xcel has avoided the rate impact limit to date. However, the on-going Solar*Rewards imbroglio presents significant new questions about the permeability of the green energy cost controls.
At 11:00 AM this morning, the PUC will take up Docket No. 11A-135E, “In the Matter of the Application of Public Service Company of Colorado for Approval of a Reduction in the Standard Rebate Offer.” In less lawyerly terms, the hearing is on Xcel’s request to lower solar subsidies. The issue is a political hot-potato in Colorado, having been the subject of protests in front of the capital last Friday, and a General Assembly hearing two days ago.
I explain in detail the context of today’s PUC deliberations here, and I provide commentary on the matter here. In a nutshell, Xcel is seeking permission to reduce its Solar*Rewards program, a solar panel installation subsidy, because it has become a money pit. This year, for example, the Solar*Rewards program will cost Xcel ratepayers almost 4 percent of their bill, for .3 percent of their electricity. Xcel suspended the program on February 17, a day after it filed its request to the PUC.
This post is a summary of who is arguing what, based on their pre-hearing filings. The information below is meant to be as accessible as possible; for nitty-gritty nuance, go here.
Xcel wants permission to lower the Solar*Rewards subsidy for solar photovoltaic systems up to 100 kilowatt capacity from $2.01/watt, to $1.25/watt. Having already exceeded the statutorily-defined target for solar power generation, Xcel suspended the Solar*Rewards program, effective since February 17, although it says it will re-open the program if the PUC grants its request.
The problem with “green” energy is that it costs more than conventional energy. We can all agree that a solar powered future would be great, but most of us also agree that we’re not willing to pay five to ten times what we pay now for energy in order to try to achieve that future.
According to the federal Energy Information Administration’s projection of future electricity costs, in 2016 wind power will be nearly 50 percent more expensive than coal and nearly 80 percent more expensive than natural gas. Thermal solar generation is projected to be 150 percent more expensive than coal, and 200 percent more expensive than gas.
Colorado lawmakers, however, would have you believe that they can control the costs of green energy. Since 2004, the State has had a Renewable Electricity Standard, a requirement that the State’s investor-owned utilities generate a certain percentage of electricity from renewable sources. This year, utilities must provide 12 percent of their electricity with renewable energy; by 2020, it is 30 percent. In addition to production quotas, lawmakers also established price controls. By statute, the retail rate impact of acquiring green energy to meet the Renewable Electricity Standard is limited to 2 percent of annual sales. That is, green energy is not supposed to increase utility bills by more than 2 percent annually.
On February 16, Xcel filed a request with the Public Utilities Commission (PUC) to reduce its Solar*Rewards payment, a subsidy for on-site solar photovoltaic installations, from $2.35/watt installed electricity generating capacity, to $1.25/watt. The next day, Xcel suspended the program, pending the PUC’s decision on its request.
Last Friday, solar industry supporters descended on the Capitol to protest Xcel’s suspension of solar subsidies. They claim that as many as 3,000 jobs have been jeopardized by the utility’s decision. Tomorrow (Wednesday March 2), the Senate Agriculture, Natural Resources, and Energy Committee will hold a hearing on the subsidy cut.
Clearly, the Solar*Rewards program is now at the fore of Colorado energy policy. This post is a long, dry primer on the matter.
What’s at Issue: Solar*Rewards
Xcel’s Solar*Rewards program subsidizes “on-site” solar power. It was implemented by Xcel in 2006, in order to help meet the goals set by Amendment 37, a 2004 ballot initiative that established a renewable energy production quota. The quota, known as Renewable Electricity Standard, required investor-owned utilities to generate at least 10 percent of their electricity with renewable energy by 2020. In 2007, the General Assembly enacted, and Governor Bill Ritter signed, HB 1281, which increased the production quota to 20 percent by 2020. And in 2010, the General Assembly enacted, and Governor Bill Ritter signed, HB 1001, which increased the Renewable Electricity Standard to 30 percent by 2020.
Xcel Energy just announced its 2010 earnings and the Minnesota based energy company did very well this year:
We had another very successful year in 2010, said Richard C. Kelly, chairman and chief executive officer. We delivered earnings in the upper half of our guidance range. This represents the sixth consecutive year in which we have met or exceeded our earnings guidance.
What’s left out of that statement is the big thank you to Colorado ratepayers who delivered the majority of earnings. As we reported last month, Colorado’s 1.36 million ratepayers represent 25.7 percent of Xcel’s total customers, but through the third quarter of 2010, Colorado accounted for 51 percent of Xcel’s earnings per share. After four quarters, Colorado now contributes even more.