Progressives in the General Assembly will have a rare opportunity to eliminate a corporate subsidy to Xcel Energy this Monday, when the House Agriculture, Livestock, and Natural Resources Committee is scheduled to take up Representative Spencer Swalm’s HB 1240.
HB 1240 would eliminate the Public Utilities Commission’s authority to allow Xcel to incorporate a $20/ton carbon “adder” into the economic models the company uses to make resource acquisition decisions. Xcel would have you believe that the carbon adder is about going “green,” but it’s actually about fattening the utility’s pockets with greenbacks.
Indeed, HB 1240 wouldn’t roll back any of the environmentalist mandates enacted by the General Assembly. Instead, it’s a surgical strike against the carbon adder, which, in practice, is nothing more than a humungous accounting loophole through which Xcel has passed itself big time profits.
Xcel has shown great dexterity applying this financing gimmick to a variety of situations. Consider
- One of Xcel’s priorities is winning market share from independent power producers on the wholesale electricity market. Older natural gas plants are Xcel’s fiercest competitors, because they have already paid off their capital costs, so they can bid electricity prices relatively low. The $20/ton carbon tax eliminates this advantage, because new plants are more efficient than older plants. It tilts the playing field to Xcel’s favor.
- On HB 1365, the Clean Air Clean Jobs Act, Xcel used the $20/ton carbon tax to obfuscate the price impact of its capital expenditures. Under the generous cost recovery terms of HB 1365, the more Xcel spends on fuel switching, the more it makes. In order to veil the true rate effects of its $1.3 billion plan, and therefore make them more palatable to policymakers, Xcel inflated the baseline rate projections by scores of millions of dollars with the carbon adder.
- On HB 1001, Colorado’s renewable electricity standard, Xcel employed the $20/ton carbon tax to circumvent the 2% rate cap that lawmakers had implemented to protect consumers. The effect of the carbon adder is to significantly expand Xcel’s annual expenditures, which increases the pool from which the company can reap profits.
When it suits Xcel’s bottom line, the company argues for a carbon tax. But when green energy investments are inimical to Xcel financial well-being, the utility will flip-flop and argue that the absence of a carbon tax makes renewable energy a bad investment. To wit,
- Xcel recently petitioned the PUC for permission to renege on a commitment to build a 250 megawatt solar thermal power plant due to “changed circumstances,” among which the utility cited “the expectation that carbon legislation won’t be enacted for several years,” which would, “erode the economics of solar thermal” [Direct Testimony James F Hill, Xcel Witness, 4 June 2010, Docket 10A-377E]
This is the height of cynicism! When the company stands to gain, it embraces an energy tax. But when it stands to lose, it disavows an energy tax.
In fact, Colorado’s poorest citizens are harmed the most by Xcel’s self-serving accounting gimmick. By increasing Xcel’s profits, this financial sleight of hand also pushes up utility bills. Because energy costs comprise a larger portion of poor peoples’ budgets, this de facto Xcel subsidy acts like a regressive tax.
A corporate subsidy that acts like a regressive tax? Sounds to me like an ideal cause for all true Progressives.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute