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HB 1365 Update: Don’t Be Shocked If Xcel Ditches the PUC’s HB 1365 Plan

Despite media reports to the contrary, HB 1365 isn’t settled

It has been widely reported that the book closed on the Clean Air Clean Jobs Act last Thursday, when the PUC selected an implementation plan after almost four months of deliberations, but this is untrue. In fact, there’s another chapter of this story, and the ending may prove a shocker.

A Quick Review of HB 1365…

HB 1365, the Clean Air Clean Jobs Act, mandates that Xcel file a plan by August 15 2010 that would:

  • be implemented by December 31, 2017;
  • meet “reasonably foreseeable” state and federal air quality regulations;
  • achieve at least 70% reductions in nitrogen oxides emissions from at least 900 megawatts of coal fired power plants

By December 15, 2010, the Public Utilities Commission (“PUC”) must approve, deny, or modify Xcel’s proposed plan. The PUC chose a plan last week.

However, the legislation gives Xcel the right to withdraw its plan (i.e., the right to walk away) if it “disagrees with the [PUC’s] modifications.”

…Back to my point: Xcel could walk away

The Colorado media, in its coverage of the PUC’s selection of a HB 1365 implementation plan last Thursday, seems to have forgotten about Xcel’s right to withdraw from the proceedings if the utility disagrees with the PUC decision.

To be sure, Xcel has a lot of incentives to approve the PUC’s preferred plan. The Clean Air Clean Jobs provides the utility with extraordinarily generous cost-recovery provisions for the PUC’s selected implementation plan. Nonetheless, there are a few warning signs that Xcel may walk away from the whole affair.

For starters, the PUC’s plan was Xcel’s 5th choice among the scenarios up for the PUC’s consideration. And in its closing arguments, Xcel “strongly urge[d]” against the selection of the plan that the PUC ultimately chose. Also, the PUC rejected Xcel’s proposed cost recovery mechanism.

These are the reasons for Xcel’s tepid reception of the PUC’s plan. In a statement released in the wake of the PUC’s decision, Xcel spokesman Mark Stutz said, “We are hopeful that we can make this plan work, but we will need to review their order carefully to determine if we think it will work for our customers and to be sure we can implement the plan.” That’s hardly a ringing endorsement.

It is likely that Xcel will reserve judgment on the PUC’s HB 1365 plan until the written decision is released, probably tomorrow.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.