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Coloradans are taking on the state’s largest monopoly utility

Coloradans are taking on the state’s largest monopoly utility

Originally published on thehill.com

Just because President Obama’s controversial and costly Clean Power Plan is dead at the federal level doesn’t mean Colorado ratepayers are out of financial danger. Nearly 1.4 million state electricity customers await a Colorado Public Utilities Commission (COPUC) decision on Xcel Energy’s legally tenuous Colorado Energy Plan (CEP).

With COPUC approval, Xcel, the state’s largest monopoly utility, plans to shift its generating portfolio from away from majority hydrocarbons (coal and natural gas) in favor of industrial wind, solar, and battery storage.

Besides building out industrial wind and solar, the $2.5 billion CEP would retire prematurely 660 megawatts (enough to power roughly 660,000 homes) of relatively young, low-cost, highly-utilized, environmentally state-of-art coal-fueled power plants.

The company makes the wild claim that the CEP will save ratepayers money or at the very least not cost anything. That claim is one of the reasons why my employer, the Independence Institute, is leading the Coalition of Ratepayers, a Colorado non-profit concerned with issues impacting small business and residential ratepayers that otherwise have no advocate and no voice.

Our coalition petitioned and was granted intervenor status in the CEP proceeding in front of the commission.

Coalition witness Charles Griffey, a nationally recognized electric utility expert, discovered Xcel has its thumb on the financial scale, titling it in the company’s favor. Among Griffey’s discoveries — $88 million worth of errors in Xcel’s modeling, which the company was forced to acknowledge; a failure to account for hundreds of millions of dollars in sunk costs and transmission costs; and a legally questionable accounting gimmick that would use funds from a renewable energy fee to pay for the coal plant retirements.

Further, Xcel is doing this without state legislative approval, something the company a year ago said should be the purview of the Colorado General Assembly.

“If we are going to fundamentally restructure the way that we do resource planning in Colorado … then that is a question for the General Assembly,” stated Xcel VP Alice Jackson in Jan. 30, 2017 written testimony to the COPUC.

Yet, the General Assembly rejected such a plan during the 2017 legislative session, which ended in May. By summer 2017, Xcel didn’t believe it needed legislative approval. Instead, the company is relying upon a Gov. John Hickenlooper executive order issued on July 11, 2017, as its authority to seek regulatory approval of the CEP. The order directs Hickenlooper’s executive branch agencies to cooperate with any company that wants to voluntarily reduce carbon emissions.

Watch what you wish for — circumventing the General Assembly is dangerous territory.

If the COPUC, whose commissioners are appointed by the governor, goes along with this scheme, they would clear the way for future governors to do the same thing on the backs of captive ratepayers.

The next governor could issue an executive order voluntarily asking for 100 percent renewables, which we’ve calculated to cost $44.88 billion dollars just for the conversion, or 100 percent nuclear, which is the logical choice for those who claim to care about emissions, or, perhaps, 100 percent coal.

What the CEP really reveals is the dirty secret of monopoly utilities. With flat or declining retail sales revenue due in part to conservation efforts, for-profit monopolies must build on the backs of captive ratepayers in order to survive financially. Ultimately their fiduciary responsibility is to shareholders, not ratepayers.

The CEP is all about Xcel building and adding to its asset base on which the company earns an authorized return on equity of nearly 10 percent. This plan allows Xcel to own 50 percent of the new renewable and 75 percent of natural gas capacity, while at the same time recovering the cost of early retirement of perfectly useful coal generation.

If extra power is needed or even if more wind power is desired, Xcel could just purchase excess energy from other suppliers in more of a market situation, which is cheaper for customers but doesn’t provide more profits for Xcel shareholders.

Colorado electricity consumers have nowhere to turn. They can’t choose their provider, and Colorado’s Office of Consumer Counsel, once considered a consumer watchdog, signed on to the CEP without adequately vetting the plan.

Since 2006, Xcel’s assets have increased a whopping 77 percent. The company’s profits have increased 93.89 percent, and profit margins have increased from 12 percent in 2006 to nearly 22 percent in 2016. Also impressive has been Xcel’s profit per ratepayer, which has jumped 76.7 percent from $178.09 in 2006 to $314.75 in 2016. All of this with low load and customer growth.

If Xcel had any competition, we’d be applauding them for doing so well in a tough market. But they don’t, and it’s why we formed the Coalition of Ratepayers.

Fighting a monopoly like Xcel isn’t cheap. It will cost the coalition hundreds of thousands of dollars. Considering we’ve already kept $88 million in consumers’ pockets rather than the bank account of a monopoly utility, we think that’s a pretty good return on our investment.

Amy Cooke is the executive vice president and director of the energy and environmental policy center at the Independence Institute.