In a recent post, I explained how Xcel maneuvers around the 2 percent annual rate cap on green energy spending. In a nutshell, the utility avoids the rate cap with accounting tricks that function to underestimate the cost of renewable energy and overestimate the cost convention energy. Thus, Xcel suppresses the annual “incremental cost” of green energy, which is subject to the rate cap, by millions of dollars.
Unfortunately, Xcel’s green energy cost accounting is even more suspect that I had originally thought. That’s because the Public Utilities Commission, in Decision No C09-0990, allows Xcel to “lock down” ongoing incremental costs of renewable energy sources for five years after they are obtained. As a result, the budgeting tricks adumbrated above (and explained in detail here) are “locked in” for half a decade.
Absent this loophole, each year the PUC would review the actual ongoing costs of green energy; with it, the PUC essentially takes Xcel at its word. To riff on a popular phrase, the PUC’s approach is to “trust, but don’t verify.”
The PUC staff voiced vehement opposition to the “lock down” of ongoing incremental costs, arguing that it requires “the Company [Xcel] only to plan or project to stay within the retail rate impact limit, and not actually stay within that limit” (italics in original). Notably, the staff added that it “is troubled by the Company’s proposal that appears to intentionally mask or hide the actual costs of renewable generation.” (2009 RES Compliance Plan application, Docket 08A-532E, Trial Staff Statement of Position, p 2).
Xcel claimed that the “lock down” of ongoing incremental costs is necessary in order to save the time and energy of an annual audit. While this is undoubtedly true, I suspect that the utility’s motive was less about saving time, and more about obfuscating the budget tricks it employed to make it seem as if it was meeting the green energy mandate and complying with the 2 percent rate impact. If the PUC revisited actual ongoing incremental costs each year, then it would necessarily expose Xcel’s manipulative budgeting. By locking down ongoing incremental costs, the utility also locks in its accounting tricks.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute