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Why Does the Office of Consumer Counsel Exist?

As I explain here, two thirds of the Public Utilities Commission care more about advancing “green” energy, than they do about ratepayer protection. I’m sad to say that the same holds true for the Office of Consumer Counsel. Evidently, in Colorado, ratepayers don’t have a public sector advocate.

By any rational calculation, Xcel’s Solar*Rewards program is bad for Colorado consumers. In 2011, the program budget, which is used to subsidize the installation of solar panels, is capped by law at 2 percent of the utility’s retail sales. Despite this cost cap, Xcel already this year has committed 4 percent of retail sales (about $97 million) to Solar*Rewards, so the program is projected to be about $50 million over budget. With this 4 percent of retail sales, Xcel will procure about .38 percent of electricity generation. In sum, the Solar*Rewards program is spending a lot of money, for only a little electricity.

Last Friday, the PUC made this bad deal even worse. It’s only March, so there was still time for the PUC to rein in Xcel’s runaway solar spending in 2011. However, rather than forcing the utility to comply with its statutory responsibilities and reduce Solar*Rewards outlays to 2 percent of retail sales, the PUC approved a Settlement Agreement that actually increased the program!

The Settlement Agreement more than doubled the amount of solar power capacity that Xcel could install, from 43 megawatts to 103 megawatts. To finance this added capacity, the PUC allowed Xcel to collect up to $178 million in deferred costs, in addition to the $97 million budgeted to Solar*Rewards this year.

Make no bones about it: The Settlement Agreement is a tremendous waste of money. The resultant electricity production is negligible, but the costs are substantial (and also regressive). The only “winners” are rich environmentalists and Xcel, which earns a substantial profit on all Solar*Rewards expenditures. The “losers” are everybody else. 

The Office of Consumer Counsel’s (OCC) mission is to protect “everybody else.” According to the OCC’s website, it “is charged with representing the small consumer before the PUC.” In light of this mandate, one would imagine that the OCC would reject the Settlement Agreement. Yet in testimony before the PUC last Friday, the OCC’s Dr. P.B. Schechter stated that the Settlement Agreement is “just, reasonable, and in the public interest.”

To me, this assertion was absurd, for the reasons I give above. So I listened closely to Dr. Schechter’s explanation of how the expanded Solar*Rewards program is “in the public interest.” It quickly became evident that he had no explanation.

During the question period, Commissioner James Tarpey asked Dr. Schechter to estimate what the Settlement Agreement would cost, if it was fully implemented. Dr. Schechter replied that he didn’t know.

Commissioner Tarpey then asked Dr. Schechter what sort of analysis the OCC had performed in order to estimate the cost of the Settlement Agreement to ratepayers. Dr. Schechter responded that the OCC had no independent ability to perform such a calculation.

At this point, a confused Commissioner Tarpey questioned Dr. Schechter as to how he determined that the Settlement Agreement was “in the public interest,” if the OCC hadn’t performed a cost estimate. Although I was listening intently, I could not discern a cogent response in Dr. Schechter’s garbled answer.

This exchange raises serious doubts about the utility of the OCC. If it can’t perform analysis, and it won’t side with the consumer, why does it exist?

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