Ratepayer interests received a small win from Colorado regulators overseeing Xcel Energy’s latest resource plan.
The Colorado Public Utilities Commission (PUC) pared back Xcel’s $15 billion request to build wind, solar, batteries, and new transmission lines by around $3 billion last week. The PUC’s trimming of Xcel’s request came as it approved an alternative resource plan that brought the capacity to be constructed down from 7.2 GW to around 5.8 GW, with cuts mostly coming from wind proposals. The alternative plan also postponed much of Xcel’s proposed transmission line spending, which was six times more expensive than the utility had previously estimated in 2021.
The commissioners advanced the alternative plan—despite expressing support for the amount of renewables proposed in the original plan—over cost concerns.
According to the Colorado Sun:
“Delaying some of the new generation would allow us to better understand the cost, value, timing and need for the new transmission before we’re committed to building it,” PUC Chairman Eric Blank said.
“The updated preferred plan had high levels of curtailment,” Commissioner Megan Gilman said. “Ratepayers pay for that, you know, and so I think it’s important to us and it’s our priority to ensure that the money that we’re seeing invested on behalf of the ratepayers is spent as wisely as possible.”
“Some of our neighbors are already struggling to pay their utility bills,” Gilman said. “I can’t say that’s a good use of their money.”
The commissioners’ approval of an alternative resource plan with fewer renewables and reduced transmission spending marks a rare instance of the PUC prioritizing ratepayer concerns over their desire to see renewables added to the grid as quickly as possible.
In recent years, the commission has been glad to approve Xcel’s high-dollar spending plans so long as they pertained to investments in renewable energy programs. They’ve traditionally reserved their green eyeshades for the utility’s proposed natural gas investments.
The alternative resource plan approved by the commission reduced the amount of wind capacity Xcel proposed building by more than half, or around 1.7 GW. It also slashed more than 300 MW of proposed solar projects. Those reductions to the Xcel’s proposal, modest as they may be, will work to reduce the overall bill increases that the utility’s customers will soon be facing to finance its transition from coal to renewables.
That rate hike reduction will also be bolstered by another key decision the commissioners made: reducing the number of new power plants Xcel will be allowed to build and own.
Under Xcel Energy’s plan, two-thirds of the generation capacity would have been owned by Xcel Energy and paid for by customers. In the alternative plan, the ownership is closer to a 50-50 split between the company and independent power producers, or IPPs.
Independent power producers build their own power plants, wind farms and solar arrays and sell electricity to Xcel Energy under contract.
Reducing the amount of capacity Xcel will be allowed to own is crucial for minimizing the financial pain ratepayers will be forced to endure during the state-mandated transition from fossil fuels to renewables.
Independence Institute’s research and modeling done by analysts at Center for the American Experiment have shown that utility profits have the potential to be the single-largest cost driver in the state’s push for 100 percent renewable energy.
Finally, in yet another surprising twist, the alternative clean energy plan approved by the PUC authorized more new natural gas capacity than even Xcel had initially proposed. The commissioners gave the company verbal approval to build 669 MW of new gas generation slated to be used as peaking assets.
This decision naturally drew the ire of environmental groups like the NRDC, who accused the PUC of “stifling renewable energy” even as it approved a more than 100 percent increase in renewable capacity on the grid.
But as Xcel pointed out in one of its filings with the commission, new natural gas plants will be essential to ensure that the state’s grid has enough reliable generation to support all of the renewables it is required to build under state law.
A risky shortcut on natural gas additions is not worth it, and the Company cannot, in good conscience, recommend it. The Company recognizes that we are working to minimize additions of new carbon-emitting resources. That is consistent with our corporate objectives, among other things. But, we have to balance that with maintaining a reliable system…
Doing this the right way—which includes maintaining reliability—is imperative.
To be sure, the PUC’s actions represent a small, temporary win. The approved plan still amounts to roughly $12 billion on primarily wind, solar, and batteries that will drive up energy bills and potentially undermine the reliability of the state’s grid. The commission also left bread crumbs that most of the proposed renewable projects it cut might one day be built and that even more rate hikes are likely on the horizon to continue funding the state’s green goals.
Blank said that all the generation proposed by Xcel Energy will eventually be needed, and he said that the resource plan is only one element that will be driving rates.
“I’d like to ask the company to provide us with a comprehensive long-term rate analysis that fully includes all of the investments that the company is claiming to the financial community that it will make in Colorado,” Blank said.
Among the potential expenses that could impact rates, Blank said, are new distribution lines, wildfire mitigation, upgrades to transmission lines and demands created as transportation goes electric, more buildings convert heating to electricity and more distributed renewable generation, such as rooftop solar and solar gardens, is built.
Nevertheless, the PUC’s approved plan heeds the warnings given by groups like Independence Institute and Center of the American Experiment on the cost and reliability risks involved in an energy transition that disregards the need for dispatchable capacity and allows monopoly utilities to profit handsomely on overbuilt renewables and excessive transmission lines.
A reduced wind and solar build-out with increased natural gas capacity and a diminished potential for monopoly profiteering is a modest win for Colorado ratepayers.