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Gross Dereliction of Duty at the PUC

Under Colorado’s green energy production quota, also known as a Renewable Electricity Standard, the cost of acquiring renewable energy like wind and solar power is limited to 2 percent of annual electricity sales.

The rules are very clear on this matter.  According to the Public Utilities Commission’s Rule 3661(h)iv, “to the extent the RES plan exceeds this maximum retail rate impact over the RES planning period, the investor owned [utility] shall modify the RES plan to limit the acquisition of eligible energy resources so as not to exceed the maximum retail rate impact for the RES planning period.” (Formatting added).

Unfortunately for Coloradans, the PUC has demonstrated that it has little interest in enforcing the rate cap. As I explain here, the PUC authorized a bevy of budget tricks that allow Xcel to circumvent the rate impact limit.

These loopholes are largely hidden from the public view, as they are shrouded in the arcane procedures of utility accounting. Ostensibly, the PUC purports to care about enforcing the rate cap on green energy….or so I thought until I read the Friday, March 4 transcript from the PUC hearing Room A. On that day, the PUC demonstrated a naked disregard for cost controls.

The hearing was on Xcel’s decision to suspend the Solar*Rewards subsidy for the installation of photovoltaic panels. Make no mistake about it: Xcel’s decision to eighty-six this solar subsidy was correct. Simply put, the program had become a fiscal albatross around the necks of Colorado ratepayers.

Already this year, Xcel has committed $97 million to Solar*Rewards ratepayer giveaways for upper middle class environmentalists. That’s about 4 percent of total sales. In return, Xcel added about .38 percent of total generating capacity. (This is an insight into the economics of solar: 4 percent of total sales to procure .38 percent of generating capacity is a bad deal.)

So, the utility came before the PUC on March 4, having acknowledged that the Solar*Rewards program budget for 2011 already exceeds the 2 percent RES retail rate impact limit by 100 percent. Given that  Rule 3661(h)iv clearly requires Xcel “to limit the acquisition of eligible energy resources so as not to exceed the maximum retail rate impact for the RES planning period,” one might have guessed that the PUC had no choice but to freeze all new renewable energy spending in the wake of Xcel’s disclosure.

To be sure, that’s what I was thinking. After all, the PUC staff has warned about Xcel’s “passive” management of Solar*Rewards costs. And for good reason: The program has been over budget annually since 2008, during which time it accumulated a $46 million negative balance (through 2010).  At a minimum, Xcel expects to add another $50 million onto this deficit in 2011.In light of this profligacy, I thought the PUC would chew out the utility, and then arrest all new renewable energy spending in 2011.

I was wrong.  Rather than controlling costs (in compliance with the law), the PUC’s paramount concern was getting the Solar*Rewards program up-and-running again, costs be damned.

PUC Chair Ron Binz, for example, was primarily concerned with how quickly the PUC could spur a settlement.  In his opening statements, Binz said “the only way to really get this done quickly, as it seems to be everybody’s wishes, is to get an agreement brought to us. And my thinking goes to us, in fact, entering an interim order of some sort, that would do that. (p 63, ln 12-16)”

Throughout the hearing, he pushed for a PUC directive that would restart the program. He called it a “straw man” approach, which would be disagreeable to both parties, and thereby compel an agreement.

Similarly, Commissioner Matt Baker was concerned foremost with resuming the Solar*Rewards subsidy, post haste.  He noted that the PUC, “would like to be able to act on something as quickly as possible. (p 95, ln 12-14)” To that end, he wanted to beef up the procedural record, so as to insulate the PUC from the charge that it failed to provide for due process, in the event that it issued an interim order. By having the stakeholders file responses to questions, he said, “we would, then, have the record sufficient to be able to issue an order, even on the 11th. (p 98, ln 6-7)”

As always, Commissioner James Tarpey was the odd man out. We already know that Chair Binz is soon to lead a life in the green energy consultancy businessi—he admitted as much in a recent Denver Post oped. Commissioner Baker, too, is an avowed environmentalist. A PUC of 3 James Tarpey’s, on the other hand, I bet wouldn’t have countenanced the regressive priorities evinced by the “New Energy Economy.”

Pointedly, Commissioner Tarpey queried the counsels to discern “bookends (p 70),” in terms of cost to Xcel ratepayers, of a settlement. When the Xcel lawyer revealed that these “bookends” were $97 million to $300 million, Commissioner Tarpey was at least ruffled. He said,

“The idea of the dollars that are being mentioned. I don’t know what CoSEIA’s (Colorado Solar Energy Industry Associations) members thought originally…as to what the potential would be…I think that becomes a factor that we need to take into account, that at some point, this is not, we’re going to guarantee solar jobs. (p 78-79, lin 23-25, 1-4)”

In any case, the Binz/Baker majority reigns supreme, so Commissioner Tarpey’s moderation is sacrificed to groupthink. On March 4, the PUC told Xcel to compromise with the solar lobby, or else. It gave the stakeholders one week to compromise.

A week later, last Friday, March 11, the PUC convened a hearing to address the matter, and approved an extension of negotiations, until Tuesday, May 15.  That’s today. This afternoon, news broke that a settlement has been reached. For ratepayers, that’s bad news.

William Yeatman is an energy policy analyst at the Competitive Enterprise institute