By Brit Naas
In a decision that evokes former President Obama’s environmental agenda, the Colorado Public Utilities Commission (PUC) on March 23, 2017, expanded its authority in a way that’s likely to drive up electricity rates.
Every four years, Xcel Energy undergoes a resource planning process that outlines their ability to meet ratepayers’ electricity demand. They present portfolios containing cost analyses regarding the utility’s generation, and the Commission selects the “lowest cost resources available to provide the company with enough capacity and energy to in turn be able to provide customers with reliable electricity.”
However, in the 2016 Energy Resource Plan, the Public Utilities Commission expanded their own power by reinterpreting the second clause of statute § 40-2-123(1)(b). A statute based on a 2008 House bill, HB08-1164, that gave the Public Utilities Commission authority to consider economic damages caused by climate change when determining what resources power Colorado. In agreement with Western Resource Advocates (WRA), an environmental organization that champions wind and solar energy, the Commission concluded they are allowed to consider future societal costs caused by carbon emissions in this ERP.
To account for these expenses, the Commission agreed with WRA again, and in a 2-1 decision, forced Xcel to run an analysis that valued each ton of emitted greenhouse gases based on the Federal Social Cost of Carbon (FSCC).
The FSCC is a controversial measurement developed by an interagency working group during the Obama era. They believed it could accurately determine a dollar value for economic damage caused by a metric ton of carbon emissions in any given year and following until 2300 A.D.
Now the Commission’s ruling did not add a line item to bills. But pricing greenhouse gases eliminates market signals by artificially inflating the prices of coal and gas generation. Suddenly, cheap, reliable sources become expensive, and the commissioners select portfolios filled predominantly with wind and solar generation.
So much for choosing the lowest cost resource.
And with only 22 percent of Xcel’s energy generation in Colorado being carbon free, future resource planning will be affected. Xcel will have to build more wind and solar generation, which raises utility bills. A prime example is the Rush Creek Wind Farm that is costing ratepayers $1.1 billion.
As of now, the Commission claims this is only an additional sensitivity analysis with no precedence, meaning: regulators will most likely not choose a portfolio adjusted for emission pricing.
But the timing of the decision and interpretation of the law is concerning. Coincidentally, the Commission delivered their ruling just days before the Trump Administration revoked President Obama’s social cost of carbon guidance. According to Aldo Svaldi of the Denver Post, “the Public Utilities Commission’s vote… represents a political statement as well as an economic one.”
The federal government steps toward rational energy and environment policy while Colorado steps away from it.
Possibly foreseeing the renunciation of the Federal Social Cost of Carbon, in a politically charged ruling, the Commission applied it to an energy resource plan. However, Commissioner Wendy Moser (the lone Republican on the Commission) was correct; the Commission should not use the FSCC when choosing generation sources for Colorado.
The reason? It’s completely inappropriate.
The FSCC considers multiple entities with CO2 footprints. Its scope is not limited to stationary producers but also includes cars and cows. It would be understandable if the models only measured social costs associated with power plant CO2 emissions. But they do not. As a result, flatulating cattle in Nebraska or cars crowding the highways of India could affect the modeling, which ultimately could impact the Commissioners’ decision.
Moreover, since the federal government devised the FSCC, the data represents a “‘comprehensive’” estimate of global climate change.” In other words, the federal social cost punishes Colorado ratepayers for all global damages related to climate change. The lawyers for Xcel captured this best when they asked Alice Jackson, Xcel’s Regional Vice President on Rates and Regulations, about the social cost of carbon accounting for sea-level changes:
Mr. Sopkin: Do — does the social cost of carbon include certain costs that may not be incurred by Colorado Customers such as sea-level- rise damages?
Alice Jackson: Yes, sir, it does.
Mr. Sopkin: I suppose I don’t need to take administrative notice the state being landlocked.
In short, the PUC, by a 2-1 vote, is forcing Xcel to model for carbon that will punish Colorado ratepayers for possible climate changes over one hundred years from now and thousands of miles away – things over which today’s ratepayers have no control.
Customers of both Xcel Energy and Black Hills Corporation should be concerned about higher energy bills. The Commission sidestepped their financial responsibility to ratepayers, and in a seemingly politically charged move, ruled in favor of implementing a “crude and highly flawed measurement.”
It is time the state legislature reigns in the Commission and politics are taken out of their rulings. Because if they are not, Xcel customers will see rate hikes in the near future and Black Hills will not be far behind.
Brit Naas is a student at Concordia University Irvine. This summer he is an intern with the Independence Institute’s Future Leaders Project in Energy and Environmental Policy.