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HB 1365 Update: Xcel's New Plan Is Actually an Old Plan

Xcel’s New Plan: It’s Actually an Old Plan

Rather than offer a new HB 1365 implementation plan after the PUC rejected its preferred plan, Xcel settled on an old plan.

Here’s a quick review of the process that led to the new/old plan. Last summer, Xcel considered nine scenarios to comply with HB 1365. In August, after modeling each of the nine possible scenarios, Xcel proposed Plan 6.1E as its preferred strategy. On September 29, however, the PUC rejected Plan 6.1E because it would have replaced a 351 megawatt Denver coal plant, known as Cherokee 4, with a 314 megawatt natural gas plant in 2022—five years after a 2017 deadline established in HB 1365. Last Thursday, the PUC reaffirmed that decision.

Thus stymied, Xcel performed another economic analysis to choose a new plan. In addition to the nine original scenarios that the utility modeled, it added three more,

  • “Plan 6.2J”: A revamped version of 6.1E, Xcel’s disqualified preferred plan, that would move forward the replacement of Cherokee 4 with natural gas in 2017
  • “Plan 6E FS” & “Plan 6.1E FS”:  These plans would switch fuels at Cherokee 4 by 2017 but replace it with a new natural gas plan sometime thereafter.

After modeling these twelve scenarios, Plan 5B was shown to be the second least expensive (after the disqualified Plan 6.1E). Therefore, “the Company, reluctantly, recommends that the Commission approve the plan that was identified as Scenario 5B,” according to testimony by Karen Hyde, Xcel’s Vice President for Rates and Regulatory Affairs.

Scenario 5B was one of the original nine scenarios modeled by Xcel over the summer. The plan is very similar to Xcel’s preferred Plan 6.1E, with the primary difference being that Plan 5B would retrofit Cherokee 4 with a technology known as selective catalytic reduction (SCR), and the coal plant would not retire until 2027 (whereas Plan 6.1E would replace Cherokee 4 with a natural gas plant in 2022).

My Snap Reaction to Plan 5B

Xcel’s support for the new plan is decidedly lukewarm, and the utility seems to be giving the PUC every opportunity to spurn Plan 5B in favor of the three plans that would either retire or fuel switch Cherokee 4 by 2017.

Ms. Hyde noted that Xcel “reluctantly” supported Plan 5B; that “Colorado has lost a great alternative” when the PUC rejected Plan 6.1E, Xcel’s preferred plan”; and also that “the Company thinks that the installation of an SCR on Cherokee 4 is not the best final resolution” (italics in original testimony). Moreover, her final words reminded the PUC, “if the Commission wishes to approve a plan that requires [Xcel] to retire Cherokee 4 prior to the end of 2017, the Commission could consider Plan 6.2J or the fuel switching alternatives 6.1E or 6E FS.”

As I said this morning, Governor Bill Ritter is intent on retiring the Cherokee 4 coal plant by 2017, in order to further his climate change goals. Given (1) Xcel’s tepid support for Plan 5B and (2) the PUC’s record of supporting the Governor’s New Energy Economy, methinks the tea leaves suggest that the PUC will spurn 5B in favor of one of the three plans that ends the burning of coal at Cherokee 4 by 2017.

What’s Next?

Next, the Colorado Department of Public Health and Environment will have to determine whether or not Plan 5B would meet all “reasonably foreseeable” state and federal air quality regulations.