Opinion: Another ‘clean energy’ bill and a new set of problems


The latest Colorado energy bill, HB19-1313, was apparently drafted for (and presumably by) Xcel Energy, though its language allows other utilities to choose to come under its provisions.
Here is the bill’s fundamental requirement: “By 2030, the qualifying retail utility shall reduce the carbon dioxide emissions associated with electricity sales to the qualifying retail utility’s retail electricity customers by eighty percent from 2005 levels. For the years 2050 and thereafter, or sooner if practicable, the qualifying retail utility shall seek to achieve the goal of providing its retail customers with energy generated from one-hundred-percent clean energy resources so long as doing so is technically and economically feasible, in the public interest …”
The bill only covers “retail sales” and does not include “sales for resale.” These constitute about a fifth of Xcel’s total sales. It only regulates CO2, but not other emissions, like methane. So the bill allows much more greenhouse gas emissions than is immediately obvious. Also, many wholesale customers have pretty flat demand, which may allow coal plants to be kept on line, further increasing total greenhouse gas emissions. So, the bill should cover all generation, not just retail. (There is also a timing issue, because emissions don’t necessarily track kilowatt-hour sales — wind and solar are intermittent, etc.)
The bill allows Xcel to own half of any new resources required to achieve the emissions reduction targets. But the bill also requires a “competitive bidding process” for these new resources. The problem is that Xcel’s return on investment in these new resources will vary depending on what is happening in the financial markets. So its future costs are unknown. For example, if there is a bout of inflation or market uncertainty and the cost of capital goes up, then Xcel’s return on equity gets adjusted up accordingly. This would make any Xcel-owned resources be more expensive.
This situation makes it impossible to hold a legitimate “competitive bidding process,” because the independent companies must make bids with fixed terms, e.g. two cents per kWh, 2% increase per year, for 20 years. I also note that the last time the Colorado Public Utilities Commission allowed Xcel to do wind non-competitively, its costs were higher. This is due in significant part to Xcel’s excessive return on its invested equity, but the PUC has so far been unwilling to take on that sacred cow.
The only real solution, and the one that serves the public best, would be to simply require competitive fixed-term bidding for all new resources. And getting the least cost generation is a critical concern. In addition to replacing Xcel’s coal plants, we will need a lot more renewables to power electric cars to cut our oil consumption and electric-powered heat pumps to replace gas furnaces.
The bill requires approval of the utility’s “clean energy plan.” But this approval process is anything but clear: It appears that the PUC could ask for modifications to Xcel’s initial proposal, but Xcel is not required to submit “more than one plan for Commission approval.” So what happens if Xcel’s initial submittal doesn’t meet with PUC approval? Frankly, the bill’s language is so opaque that I couldn’t make sense of it.
The bill also has Xcel’s escape clause language: “Any actions … taken by the qualifying retail utility shall be presumed prudent to the extent those actions are consistent with the implementation of an approved clean energy plan.” Leaving aside the strange grammar (“actions” are “implementation”), this presumption of prudency mostly protects Xcel from legal challenges to its “actions.”
This gets to a fundamental point that the Legislature really needs to deal with if we are ever to get to clean energy in the least expensive manner. If Xcel is going to continue to be given a guaranteed share of the market and be protected from legal challenges, then the PUC needs to reduce Xcel’s return on equity from its current almost 10% level to what other risk-free investments get. Both Xcel’s recent bidding results and Boulder’s request for indicative pricing show that independent power generators can provide renewable power with full backup for less than Xcel can. And if Xcel only got risk-free levels of return on its decommissioned coal plants, then all of the “securitization” nonsense that I discussed in an earlier op-ed would go away, because the cost of just paying off Xcel’s dead coal plant investments would be much more reasonable.

Clearly, this bill and the legislative drafting process in general need more public input and better analysis before any votes are taken.

Popular Posts

Opinion: Opportunity for the new Boulder City Council

Congratulations to the four new Boulder City Council members! You have a great opportunity to make a contribution to the Boulder community, but it will take a lot of work to do it responsibly; the learning curve is pretty steep. Here are some suggestions for you (and other Council members) that may help improve the process. Read the Charter. It is the document that governs how you, city staff, and board and commission members operate, and how you relate to each other. It defines the limits of your and their power, and can only be amended by a citizen vote. You don’t have to remember every word. But just knowing what’s there makes you more self reliant and less at the mercy of others’ opinions. For example, relative to the recent meeting discussion over diversity, the council does  not  have the power to suspend the rules as to when the mayor is selected. Charter Section 14 specifies, “The mayor shall be chosen by the council from its own number, upon the convening of t...
Read more

Opinion: Is this the end of Boulder as we know it?

Much of what has made Boulder such a great place to live has been the work of people half a century ago. These people recognized what I call the “ ratchet effect ,” that bad development decisions cannot be undone, so policies needed to be put in place to prevent, or at least limit, the damage that a growth-at-all-costs majority of the council could do. These policies include charter limits, like the Blue Line that prevents city water for development from being supplied above a certain altitude, the 55-foot height limit that has prevented high-rise development from cutting off our views, and the open space referendum process that allows a 60-day window for citizens to challenge disposals of open space. Other constraints include the Boulder Valley Comprehensive Plan’s requirement for Planning Board agreement for land-use changes in the area inside the city limits (Area I) and additional agreement by the county commissioners and county Planning Commission for urban development further...
Read more

Policy Documents: Impact Fees and Adequate Public Facilities

I am writing this to correct some of the apparent inaccuracies put forward at the 10/14 CC/PB study session about charging growth for its costs. I do not claim to be an expert in the field, but I have studied it long enough and consulted with enough supposed experts and legal types to understand most of the basics. In addition, I have found that the experts don’t necessarily know everything and won’t necessarily put forward the most appropriate solutions. The fundamental rule, both legal and equitable, is that growth should pay to address its impacts so as to maintain existing levels of service (LOS) for existing residents and businesses. But growth cannot be required to improve levels of service. LOS is measured in all sorts of ways depending on the facility and/or service being measured. For transportation, it could be total VMT, travel time, intersection waits, access to transit, etc. For schools, it might be square footage per pupil, etc. For water, it could be water righ...
Read more