The CEO of San Francisco based Energy Innovation Hal Harvey absurdly compared Xcel Energy’s massive fuel switching scheme called the Colorado Energy Plan (CEP) to a cheap first class airline seat to New York City.
Many of us in Colorado know that’s not true; the experience has been more like flying on an abusive airline – you know the one where you get thrown off – rather than a luxury experience for ratepayers.
Xcel is Colorado’s largest monopoly utility with roughly 1.4 million captive electric ratepayers. Mr. Harvey naively believes Xcel is “embracing” industrial wind because it’s cheaper than two existing coal-fired power plants. In reality, building hundreds of turbines gives the monopoly utility an excuse to pad its burgeoning asset base on which it earns a guaranteed profit. Politicians pat themselves on the back, and the utility rakes in record profits.
Everybody wins, except ratepayers who must pay the high price.
A 2017 study by the Independence Institute—my employer—showed Xcel’s profits increased nearly 94 percent as Colorado transitioned toward more industrial wind over the last decade.
In that same decade, customer growth has been anemic at just over 9 percent, while profit per ratepayer increased a staggering 76.7 percent. How? Because the real money for Xcel is made by building more power plants, where it gets a roughly 10 percent rate of return for every dollar spent.
Xcel’s asset portfolio has grown by a whopping 77 percent. In 2006, Xcel’s assets per ratepayer were $3,246.24. By 2016 that number ballooned to $5,238.47, a 61 percent increase.
If Xcel had any competition, we’d be congratulating them on increasing their profits. But it doesn’t. Colorado ratepayers have no choice.
So, when the monopoly announced its plan to spend $2.5 billion to prematurely retire two affordable, reliable, environmentally-superior coal-fired units, replace them with predominantly industrial wind and some solar and save ratepayers money, we were skeptical.
Instead, the CEP looked to be a plan to expand Xcel’s asset base and earn more profits on the backs of captive ratepayers.
The Coalition of Ratepayers (led by the Independence Institute), a Colorado non-profit concerned with issues impacting small business and residential ratepayers that otherwise have no advocate and no voice, petitioned and was granted intervenor status in the CEP proceeding before the Colorado Public Utilities Commission (COPUC).
Coalition witness Charles Griffey, a nationally recognized electric utility expert, discovered Xcel had its thumb on the financial scale, tilting it in the company’s favor. Instead of “saving” $285 million as Xcel claimed, the plan would cost ratepayers an additional $253-$390 million.
That’s a half billion dollar difference.
Among Griffey’s discoveries — $88 million worth of errors in Xcel’s modeling, which the company was forced to acknowledge; a failure to account for hundreds of millions of dollars in sunk costs in the coal plants that will not be written off Xcel’s books; and a legally questionable accounting gimmick that would use funds from a renewable energy fee to pay for the coal plant retirements. Those advertised cost savings wouldn’t materialize for decades, if at all.
And those wind and solar bids that Mr. Harvey claims were cheaper than the existing units? Not true. They don’t give an accurate representation of the transmission costs for the new plants, and at anywhere from $1-$2 million per mile, those costs could run into the hundreds of millions of dollars. That’s a little like buying your cheap first-class seat only to find the price didn’t include the necessary flight crew to get you to your destination.
Those bids also exclude the hundreds of millions of dollars ratepayers already have spent to upgrade the two units slated for retirement. This would be like purchasing a perfectly comfortable, affordable economy seat and ditching it to chase after the cheap first class seat.
You’ve spent the money, the seat will go unused, and upon arrival, you realize you paid for both.
The Coalition asked for truth in advertising and the COPUC agreed with us. In its March decision, “The PUC did not give Xcel’s stipulation a blanket approval. Instead, it asked for more information and figures, in part because of challenges by the Coalition of Ratepayers,” as the Colorado Springs Gazette reported.
The COPUC also asked Xcel to rerun its numbers free of the monopoly’s creative accounting techniques. Even with its army of lawyers and expert analysts, the utlity asked for and was granted two deadline extensions for its final report on the costs of the CEP.
Xcel recently released its new numbers. Same story, different accounting. This time, Xcel claims a $213 million cost saving. It also proposes a new line item charge on ratepayers’ bills to pay for the plan, which is strange since Xcel sold the CEP as a plan to save money.
Further, by Xcel’s own accounting, alleged CEP cost savings don’t materialize until 2046 – 11 years after the scheduled retirement of the two coal plants. So, for the next nearly 30 years, ratepayers will be paying more money for – not saving money on – the CEP.
The bottom line is continued operation of the two coal-fired plants is far more economical for ratepayers than the CEP. In other words, the too-good-to-be-true first class seat costs far more than advertised. Still, Xcel may get approval for its CEP. We ask that ratepayers be informed of the true cost, then let them decide if they are willing to pay it.
Amy Cooke is Executive Vice President of the Independence Institute, a Colorado free market think tank. She is also a senior fellow with the Independent Women’s Forum in Washington, D.C. She can be reached at email@example.com.