In a decision evoking former President Obama’s environmental agenda, the Colorado Public Utilities Commission (PUC) in March expanded its authority in a way that’s likely to drive up electricity rates.
Every four years, Xcel Energy undergoes a resource planning process that outlines their ability to meet ratepayers’ energy demand. They present portfolios containing cost analyses regarding the utility’s generation, and the PUC selects the “lowest cost resources available to provide the company with enough capacity and energy to in turn be able to provide customers with reliable electricity.”
However, in the 2016 Energy Resource Plan (ERP), the PUC expanded their power by reinterpreting the second clause of a statute based on a 2008 bill, which authorized them to consider the economic damage caused by climate change when determining the energy sources for Colorado. In agreement with Western Resource Advocates (WRA), an environmental organization that only champions wind and solar energy, the PUC concluded they are allowed to consider future societal costs caused by carbon emissions in this ERP.
To account for those expenses, in a 2-1 decision, the PUC forced Xcel to run an analysis that values each ton of emitted greenhouse gas based on the Federal Social Cost of Carbon (FSCC)—which is a controversial measurement developed by an interagency working group during the Obama era. They believed it could accurately determine a dollar value for economic damage caused by a metric ton of carbon emissions in any given year and following until 2300 A.D.
The PUC’s ruling did not add a line item to bills, but pricing CO2 emissions eliminates market signals by artificially inflating the price of coal and gas generation. Suddenly, cheap, reliable sources become expensive, and the commissioners select portfolios filled predominantly with wind and solar farms.
So much for choosing the lowest cost resource.
Only 22 percent of Xcel’s energy generation in Colorado is carbon free, so their future resource planning will be significantly affected. They will have to acquire more wind and solar assets similar to the Rush Creek Wind Farm, which is already costing ratepayers $1.1 billion.
As of now, the PUC claims this is only an additional sensitivity analysis, meaning regulators will most likely not choose a portfolio adjusted for emission pricing. But coincidentally, the PUC delivered their ruling just days before the Trump Administration revoked President Obama’s social cost of carbon guidance. As the Denver Post’s Aldo Svaldi reported, “the Public Utilities Commission’s vote… represents a political statement as well as an economic one.”
So while the federal government steps toward rational energy and environment policy, Colorado steps away from it.
Possibly foreseeing the renunciation of the FSCC, in a politically charged ruling, the PUC applied it to an energy resource plan. However, Commissioner Wendy Moser was correct that the PUC should not use the FSCC when choosing what powers Colorado.
The reason? It’s completely inappropriate.
The FSCC considers multiple carbon producing entities including cars and cows. It would be understandable if the models only measured social costs associated with power plant CO2 emissions. But they do not. As a result, cattle in Nebraska or cars in India could affect the modeling, which ultimately could impact the PUC’s decision.
Moreover, the FSCC data represents a “‘comprehensive’ estimate of global climate change.” In other words, it punishes Colorado ratepayers for all global impact related to carbon emissions. The lawyers for Xcel captured this best when they revealed customers’ utility bills would compensate for the impact of sea-level change—something Colorado citizens rarely consider since they live in a landlocked state—if a portfolio is chosen that accounts for the FSCC.
Customers of both Xcel Energy and Black Hills Corporation should be concerned about higher energy bills. The PUC sidestepped their financial responsibility and in a seemingly politically charged move, ruled in favor of implementing a “crude and highly flawed measurement” that punishes ratepayers for possible climate change over one hundred years from now and thousands of miles away.
It is time the legislature reigns in the PUC and politics are taken out of their rulings. Because if they are not, Xcel customers will see rate hikes in the near future and Black Hills will not be far behind.
Brit Naas is an intern with the Independence Institute’s Future Leaders Project in Energy and Environmental Policy, and is a student at Concordia University Irvine.