The Public Utilities Commission this week held deliberations on Xcel’s implementation plan to meet H.B. 1365 (“The Clean-Air Clean Jobs Act”), legislation that effectively mandates fuel switching of 900 megawatts of electricity generation from coal power to natural gas.
If you haven’t been following H.B. 1365, it’s a classic case of government picking and choosing winners and losers. In a nutshell, the Ritter Administration used the false threat of a pending federal regulatory crackdown to scare the legislature into supporting a bill that benefits the state’s natural gas industry at the expense of the coal industry. [N.B. The Governor’s H.B. 1365 deceptions will be detailed in a forthcoming study by me and Amy Oliver Cooke.]
Here are the highlights from this week’s hearings:
- On Thursday morning, the PUC refused to reconsider its September 29 decision excising from Xcel’s preferred implementation plan (“6.1E”) all actions that would have occurred after a December 31, 2017 deadline set by H.B. 1365. The practical consequences of the PUC’s September 29 determination was to exclude from Xcel’s plan 2022 fuel switch at the 350 MW Cherokee power plant outside of Denver. According to the PUC Commissioner Matt Barker, “what had been the preferred plan, is no longer on the table.”
**Side note: The PUC’s reaffirmation of its September 29 decision deflated the deliberations. Without a plan in discuss, there wasn’t much subject material for a hearing.
- Also yesterday, PUC Chairman Ron Binz and Commissioner Matt Baker refused to recuse themselves in the wake of Colorado Mining Association’s revelation last week that Binz and Baker participated in negotiations to draft H.B. 1365. The CMA argued that the commissioners’ participation in the formulation of H.B. 1365 has, “at the very least, the appearance of impropriety, and, at the worst, serious bias,” and therefore violates the Colorado Code of Judicial Conduct. For this reason, the CMA filed a motion to have Commissioners Binz and Baker disqualify themselves. Commissioners Binz and Baker refused. Chairman Binz said that the allegations are the result of “misunderstandings” and “misrepresentations” of “unguarded emails.”
- Xcel’s VP for Regulatory Affairs Karen Hyde conceded that she, too, was a party to H.B. 1365 negotiations.
**Side note—Bullet point 1 coexists uneasily with bullet points 2 and 3. In light of the fact that the PUC, Xcel, natural gas producers, and the Colorado Department of Public Health and Environment were all party to negotiations that created H.B 1365, and, furthermore, that CDPHE also consulted Xcel as it formulated its implementation plan, it is mind-boggling that Xcel bungled its preferred plan.
- Ms. Hyde indicated that Xcel will roll out its new strategy on Monday. She intimated that there are “easy fixes” for 6.1E, but she also said that Xcel may find an alternative plan “infeasible.” According to Xcel’s counsel, the utility has yet to make a decision, which means that this is going to be a very busy weekend for Xcel’s top brass.
- She also stated that a 4% to 6% rate impact is “reasonable” for a potential alternative plan. For perspective, 6% is about 4 times the estimated rate impact of Xcel’s preferred plan.
**Side note—If Xcel were to decide that an alternative H.B. 1365 plan is infeasible, then all hell would break out. That said, Xcel has every incentive to file an alternative. Although it might not be as lucrative as its preferred plan (which would have generated a $130 million profit), the utility is entitled to a 10.5% return on all “construction” costs, and it’s impossible to switch fuels without a lot of construction.
- So far, today’s hearing has been dominated by jockeying between Xcel’s lawyers, and those of parties that oppose H.B. 1365’s plan (like Peabody coal and the Colorado Mining Association), over the rules that will dictate cross examinations of Xcel witnesses after Monday’s plan is released.
- The big news today is that the PUC will make a determination on Xcel’s new H.B. 1365 preferred plan (assuming Xcel submits one on Monday) next Wednesday.
I’ll be watching all Monday, so stay tuned for updates.
William Yeatman is assistant director of the Center for Energy and Environment at the Competitive Enterprise Institute.