Coalition of Ratepayers

Imagine 1500 feet of (electrical) freedom…

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By Brit Naas and Amy Cooke

What if we could break free from the massive transmission lines and power plants and the utility-scale wind farms that are hundreds of miles away? It’s not impossible. From cryptocurrency to ride and home sharing companies, decentralized and sharing economy platforms are altering sectors in a way that was unfathomable twenty years ago. 

We at the Independence Institute believe the power industry is about to see a similar renaissance, as companies like LO3 Energy work to make residential microgrids a reality – where neighbor-to-neighbor transactions occur with regularity. 

As with any change – whether cultural or economic – movement away from the status quo usually doesn’t happen overnight. This is especially true for the power industry. For nearly a century, private, for-profit regulated monopolies have dominated the electricity sector, reaping in billions of dollars for their shareholders courtesy of captive ratepayers.  

Theoretically, Colorado’s Public Utilities Commission and our state legislature serve as watchdogs over these for-profit monopolies. Publicly traded monopoly corporations are guaranteed a profit for their “just and reasonable” rates to provide service to ratepayers, who have no choice in their electricity providers. Monthly utility bills, sometimes larded up with additional fees for unnecessary corporate expansion, have become more of a wealth transfer system between captive customers and corporations’ shareholders. 

Obviously, monopoly utilities do not yield this privileged position voluntarily. From Tri-State Generation and Transmission to Xcel Energy, they are notorious for their efforts to resist change that could lower or even eliminate their guaranteed profit margins.  

Delta-Montrose, a rural electric cooperative that services Montrose, Delta, and Gunnison counties, is currently trying to withdraw from Tri-State because its members want the freedom to determine the type of sources that generate their electricity. It had hoped the process would have been nonconfrontational and fair for both parties, but Tri-State is resisting and has asserted that the co-op cannot withdraw. Not only is Tri-State’s position most likely illegal, it is also subversive to Delta-Montrose’s members’ autonomy and self-determination. 

Xcel, Colorado’s largest electric utility, is the glaring case study of how our centralized electricity generation and distribution business model is a disservice to customers and a financial windfall to the monopoly. 

It has been wildly successful at lining its shareholder’s pockets by appealing to the renewables-at-any-cost crowd. Self-described environmentalists such as the Sierra Club, Western Resource Advocates, and Conservation Colorado have formed an unholy alliance with Xcel. 

These special interest groups with their own deep pockets and a myopic view of utility-scale wind and solar have aided and abetted Xcel’s unjust enrichment at the expense of innovation, free markets, the environment, and most importantly – those of us paying the bills, otherwise known as ratepayers. 

Protected by an army of lobbyists, government officials, and entrenched interest groups, any hint of reform with the potential to threaten Xcel’s stranglehold on its 1.4 million captive ratepayers is met with open hostility and blatant lies. Despite the plethora of money-saving pledges, have your rates gone down? Furthermore, Xcel has used the “unholy alliance” to strengthen its financial and monopoly position. 

Depending on need and political will, Xcel has used its position either to circumvent the Public Utilities Commission by going directly to the state legislature, or to circumvent the state legislature by going directly to the Public Utilities Commission. 

It’s a clever strategy but not fool-proof for Xcel and its sycophants. Not all legislators are enamored with Xcel’s lying and bullying to protect its financial gravy train. In the 2018 session, a bipartisan group of legislators led by Senator Steve Fenberg (D-Boulder) showed a willingness to chip away at the monopoly’s stranglehold as one of the first states to pass a “right to store” bill (SB18-009). With Governor John Hickenlooper’s signature, Xcel residential customers now have an option to store their own electricity free from the monopoly’s interference.  

This brings us back to the idea of 1500 feet of freedom. We urge those same courageous lawmakers to craft and pass legislation that will allow individuals to buy or sell power produced and/or stored within 1500 feet of them without regulatory and monopoly interference. 

Let’s say a business owns a mini solar garden or a natural gas generator, but it doesn’t need all of the power it can produce. That business could contract with a neighboring business to sell its excess power. Assuming they comply with all local building codes, the contract is between the two businesses free from PUC or Xcel interference. This would also work for neighbors. One neighbor may invest in solar panels while the next-door neighbor invests in battery storage. They decide to share the power and capital costs. All of this happens without regulatory or utility meddling. 

We believe a commercial or residential customer should be able to use the electricity they’re producing and storing as they see fit. This could mean using it themselves or selling it to those within 1500 feet of them.

As evidenced by an experiment conducted by the Brooklyn Microgrid in 2016, we have the technological ability to trade electricity via a peer-to-peer model. Three years ago, two participants in the Brooklyn Microgrid completed the project’s first peer-to-peer, or in this case, neighbor-to-neighbor transaction. One had solar panels that produced excess energy, the other wanted to purchase that excess energy. There was no middleman, just two neighbors who agreed upon a price and completed the deal.  

According to the Brooklyn Microgrid’s website, this first transaction was a “sandbox experiment.” However, this year, the Brooklyn Microgrid is going live, and both the sellers and buyers are going to experience energy choice. 

The technology is there, and 1500 feet of freedom puts innovation over regulation. It could reduce the need for behemoth-sized power plants and the hundreds of miles of transmission lines that go along with them. It could put money in individuals’ pockets rather than just corporate executives and shareholders. And it would put individuals in charge of power production and usage. 

Now is the time to unshackle ratepayers from the confines of a centralized grid and monopoly utility and propel the power industry into the twenty-first century. 

The Coalition of Ratepayers Case Study

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The Coalition of Ratepayers is a Colorado non-profit composed of small businesses and individuals. It has been an active party in two electric utility regulatory proceedings: the Rush Creek Wind Farm and the Colorado Energy Plan (CEP). 

The Coalition first intervened against the Rush Creek Wind Farm, and although the Public Utilities Commission (PUC) approved it, the Coalition’s involvement in that case as a PUC recognized party helped set it up to participate in the Colorado Energy Plan (CEP) proceeding, which was larger and more impactful.  

The following study discusses the Coalition and its work in the regulatory sphere, pertaining mainly to the Colorado Energy Plan but also touching on its participation in the Rush Creek Wind Farm case. It also suggests ways to reform the Public Utilities Commission and discloses an avenue the Coalition is exploring that will make intervening more feasible.

As is stated in the report, “Participating in public utility proceedings is not for the faint of heart.” There are many hurdles any party has to contend with, and for new participants, those hurdles seem much higher. As a relatively new party, this was true for the Coalition of Ratepayers, and at the beginning of the CEP, most parties derided and thought very little of it. However, by the end, the Coalition had become Xcel’s chief opponent. Its legal team was exceptional, and its expert witness was fantastic, revealing $87 million worth of errors in Xcel’s modeling and accounting. By the Commissioner’s own statements, the Coalition of Ratepayers had provided much to the proceeding.

The Public Utilities Commission ultimately approved the CEP, but the Coalition was able to disprove Xcel’s claims that it was a money saving plan.

Therefore, while it may be difficult to participate in regulatory proceedings and combat the ever-encroaching bureaucracy, it is essential. We hope our case study can be a resource to groups that go against Colorado’s or any state’s regulatory regime. 

Coalition of Ratepayers Case StudyDownload

Uber for energy: Is electricity the next sharing economy?

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Second article in our series about microgrids

The United States’ traditional electric grid is an engineering marvel with nearly 160,000 miles of transmission lines, millions of miles of distribution lines, and over 73,000 power plants.

It delivers power throughout all of America, and it allows us to use air conditioners in the summer and heaters in the winter. One hundred years ago, electricity was a luxury, today, it is an affordable staple and absolute necessity to power our 21stcentury economy.

But the traditional, centralized electric grid is ripe for change. Large power plants can cost up to a billion dollars to build and are often located miles from population centers. As a result, transmission lines, which cost a million dollars or more per mile, must be extraneously long in order to connect the plant with the rest of the grid. These current realities should be considered necessary evils to maintain America’s electrification, and they cost ratepayers, who are sometimes captive customers, millions every year.

Moreover, as the previous post explained, both regulation and deregulation has stifled innovation and has failed ratepayers. The status quo is either endure an esoteric, regulated model that allows utilities to manipulate the market and gouge their customers or live with a deregulated market with volatile rates.

All the while, new business platforms like Uber and Airbnb have permanently altered traditional business models that a decade ago seemed unchangeable. Economists are calling the market where these new entities operate the sharing economy, and while it may seem impossible, its next breakout platform could be the energy sector because of microgrid technology.

Microgrids are small electric grids that consist of generation sources, distribution lines, and control mechanisms that switch gears and regulate voltage. According to the Department of Energy, “A microgrid is a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.”

Within the service area of a microgrid, electric generation is disseminated and owned by individuals and businesses. One household may install solar panels and batteries while another might utilize a diesel or natural gas generator. Regardless, because individuals own the generating sources, thereby decentralizing generation, massive power plants and long transmission lines are rendered obsolete and no longer needed.

Distribution lines would still be required within the “defined electrical boundary” in order to connect the participants, but without the need for large power plants and long transmission lines, infrastructure costs would drop.

From powering prisons to college campuses to neighborhoods, microgrids enable communities to be independent from central electric utilities. They’re powered by a variety of sources (generators, batteries, solar panels, etc.) and are self-sufficient systems that can act in parallel with the central grid or function autonomously.

It’s Uber for Energy, or the power sectors’ neighbor-to-neighbor economy. If you’re tired of the electricity cartel and its enablers at the Public Utilities Commission who keep customers captive, maybe it’s time to think about how you, your neighbor, and community can gain independence from Colorado’s regulated monopolies by creating your own microgrid.

Article 1, Article 3, Article 4

Xcel Selling Snake Oil with its Colorado Energy Plan

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Xcel Energy is promoting its Colorado Energy Plan (CEP) like a snake oil salesman selling his magical elixir. As advertised, it’s supposed to solve Colorado’s environmental problems while saving ratepayers money. But don’t think for a second the CEP won’t procure the regulated monopoly a hefty profit, so if the benefits it’s touting sound too good to be true, they probably are.

Because Xcel is a regulated utility, its year to year profit margins are determined when the Public Utilities Commission sets the company’s rate of return—usually near 10 percent. Its profits might not be as high as other corporations’, but this capping mechanism is a tradeoff for operating with little to no risk. That is, unless Xcel bypasses the capping mechanism through increasing the value of its asset base by building and owning powerplants, transmission lines, and in the near future, industrial size batteries. Not to mention, if the utility retires a power plant before its scheduled closure, it has the ability to make customers pay the remaining balance.

Simply put, if Xcel is willing, it can cheat the system and operate with no risk while procuring massive returns on its investments. And to be frank, it is willing. Just look at the utility’s proposed plan, where it wants to prematurely shut down two coal plants and move toward a portfolio made up predominantly with intermittent energy sources, solar and wind. Xcel claims the CEP will eventually save us money, but we aren’t likely to see these savings because intermittent energy sources have notoriously short lifespans.

John Balfour, President and CTO of AstroPower Corporation, admitted it’s a problem the industry faces because it inhibits solar power development. On average, wind turbines and solar panels operate 20 to 25 years. Contrast this with a coal plant’s 40 and a gas plant’s 30 years, and you see why it’s an issue. According to Balfour, under current technology, investment into wind and solar generation is short minded and would put a utility in a financially fragile position.

For utilities operating in a deregulated market, where they can’t rely on government officials guaranteeing them a return, investing in a coal or gas plant is less risky because it will operate for half a century. Just look at Comanche Units 1 and 2, the coal powered generating stations Xcel wants to close. They began commercial operation in the 1980s and are still functioning today.

Xcel doesn’t face the same problems unregulated utilities face, though. Because of its regulated monopoly status, the utility understands that replacing power stations every 20 years translates into consistent, larger profit margins. And instead of making real time business decisions, Xcel simply has to convince our Public Utilities Commission its plan is both economical and beneficial for Colorado.

For example, during a recent CEP hearing, Xcel argued the plan should be adopted because it saves ratepayers money, but the savings don’t materialize until 2042 – 24 years from now.

Not only is the timing outlandish but do the math. If the generating source that is supposed to deliver these savings shuts down or must be replaced in 20 years, will we actually see them? No. When we’re supposed to receive these savings, Xcel will be opening another proceeding to replace the wind farm it’s hoping to build now.

Xcel is and always will be motivated by profit. If there is competition, this isn’t a wrong. But Xcel doesn’t have competition. It’s a regulated monopoly, operating in a low risk market that enables it to gouge customers for what it claims is economical and beneficial.

The Colorado Energy Plan won’t save ratepayers money and it won’t save the environment.  And Xcel isn’t a savior on a white horse. The monopoly is a twenty-first century century snake oil salesman, hawking a magical elixir, solar and wind energy. The only difference, we can’t expect him to leave town after the show.

Brit Naas is an energy policy researcher at the Independence Institute.

Article originally published on Complete Colorado Page Two.