Coalition of Ratepayers

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

Don’t be dull, embrace microgrids

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By Casey Freeman

First article in our series about microgrids

Xcel Energy and Black Hills Energy are Colorado’s two regulated electric monopolies. Xcel is the larger of the two and provides retail service to the greater Denver Metro Area, Greeley, and Grand Junction, while Black Hills services Pueblo and the surrounding area. These utilities operate in a regulated market with no competition and provide power to a combined customer base of approximately 1.5 million. Both are Colorado Public Utilities Commission (PUC) regulated, for-profit corporations and award annual dividends to their shareholders.

As Colorado public policy including renewable mandates and fuel switching have driven up electricity rates, there has been substantial concern over how these utilities treat ratepayers, and not without cause. In 2010, Black Hills raised its rates 13 percent, and from 2012 to 2017, increased them an additional three times. Around 7,000 people per year were receiving disconnect notices, and to reconnect, customers must pay the missed bill in full along with a fee and a three-month deposit. The cost can end up being higher than $2,000, which is devastating for the residents of cities like Pueblo where the median household income in 2016 was $35,770 compared to a statewide average of $62,520.

While a reconnecting fee alone is a difficult hurdle to overcome, loss of electricity carries with it much heavier problems like social services breaking apart families, forfeiture of public housing, and the inability to preserve perishable goods. A remedy Black Hills offers is the Black Hills Energy Assistance Program or BHEAP, a program for low-income households in which customers who meet specific income requirements can receive a deduction of $60 from their monthly bill. However, this assistance is at the expense of other customers who are charged a monthly fee to sustain the program.

For ratepayers in Colorado, there is no other option but to endure the service of their electric provider since a regulated market prevents customers from choosing a different company.

Certainly, giving consumers the freedom to choose their own provider is better than being forced into a monopoly utility. But deregulation isn’t without its own problems. For example, the 2002 Texas State Legislature passed a law that deregulated the energy market and allowed competition between electricity providers. It was meant to address the detriments of a regulated energy market. Then Governor George W. Bush summarized his support saying: “Competition in the electric industry will benefit Texans by reducing rates and offering consumers more choices about the power they use.”

Market manipulation in the form of subsidies for preferred energy sources has made the reality of deregulation a bit different than originally hoped. Consumers do enjoy a wider range of choice in energy suppliers, but rates have been more volatile and subject to dramatic increases. Subsidies for renewable energy from both the state and federal government have artificially depressed wholesale intermittent energy prices. As a result, baseload power sources are becoming uneconomical and closing, causing a scarcity in energy supply. This is damaging to ratepayers because in times of scarcity, power providers will raise electric retail rates to prepare for surging wholesale electric rates.

And in the summer of 2018, this was especially problematic. Three coal-fired power plants closed in the spring just ahead of Texas experiencing record-breaking temperatures that caused a dramatic increase in electricity demand during the summer. Wholesale pricing averaged $200/MWh during peak hours, which was a $150 increase from the previous year, and in May, wholesale prices spiked to $1,500/MWh.

Simply put, when power producers chase subsides, baseload power sources close and wholesale electricity prices are more than likely to surge, ultimately increasing retail electric rates and hurting ratepayers.

Does Texas’ failure at deregulation indicate a regulated market structure is the only alternative then? The short answer is no. In addition to the issues that many Colorado ratepayers have to contend with, Dr. Lynne Kiesling, an accomplished author and professor of Economics at Purdue University, believes a regulated energy market “stifles innovation.”

Kiesling makes a compelling argument that America has been using the same business model for over a century, which she believes has resulted in a sector devoid of new ideas on energy generation and usage. Beyond lousy service and rising rates, consumers have little incentive to become personally involved with their energy consumption, and the lack of competition incentivizes utilities to chase bad investments because they’re more profitable than innovation that save ratepayers money.

According to Kiesling, the regulated market has dulled both parties, the customer and the utility, which now seem content with mediocrity.

Currently, there are two options for ratepayers: a regulated or deregulated business model. But as regulated utilities continue to gouge customers and manipulate the market, and wholesale deregulation only seems to offer another bleak outlook, it’s time to look beyond the status quo and embrace innovation.

Could microgrids be the answer? Maybe. Colorado already has experimented with them. Stay tuned for the next article in this series.

Article 2, Article 3, Article 4

Casey Freeman is an intern in the Energy & Environmental Policy Center at the Independence Institute. She is pursuing a bachelor’s degree in political science with a focus on legal studies from the Metropolitan State University of Denver. 

Club 20 and its due diligence

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After a little due diligence, Club 20, the long-time “Voice of the Western Slope,” revised its position on Xcel Energy’s Colorado Energy Plan from “support” to “neutral” on Xcel Energy’s Colorado Energy Plan (CEP) according to a letter it sent to the Colorado Public Utilities Commission last November. Originally, the Western Slope’s premiere “coalition of counties, communities, businesses, & individuals” supported the plan.

The CEP is a massive $2.5 billion fuel switching scheme to retire a decade ahead of schedule nearly 700 megawatts of the state’s most affordable, reliable and environmentally superior coal fired power and replace the units with more than 2,000 megawatts of various intermittent sources predominantly wind and solar.

Why bring it up now? Because Xcel’s mega PR machine is working overtime pushing its narrative that everyone is on board and that only “traditional opponents” — to use Xcel Colorado President Alice Jackson term  — question the plan. The reality is that with a little due diligence, many, including consumer groups, labor organizations, renewable energy advocates, electric cooperatives and even PUC Staff, have concerns about the CEP.

Club 20’s initial support was puzzling because for many Western Slope communities that are members of Club 20, coal is a proud way of life, as a recent Craig Daily Press editorial  made abundantly clear:

The coal industry built this community, and the coal industry is what allows this community to continue. Our family members, our friends, and our neighbors are coal miners, and in most Moffat County households, coal is what puts food on the table and gasoline in the tank.

What’s more, coal is a way of life here in Northwest Colorado. It’s a time-honored and noble line of work, and in many families, working in the mines is a proud tradition that’s been passed from father to son for generations.

…Honestly, we’ve had just about enough of being told by corporate interests that coal is somehow evil and that, by extracting it from the ground, we are also evil — that we’re a bunch of greedy, morally bankrupt ingrates who care nothing for the environment or the future of our planet.

Well, that’s simply not true, and, frankly, we resent the implication.

It’s that way of life that Club 20 cited as a reason for the change in position.

We are strongly opposed to the early retirement of coal-fueled power plants and have grave concerns about the impacts to our local coal producers and our local economies with such early retirements.

Those “impacts” will be felt on family budgets too. With Xcel’s cost savings claims thoroughly discredited, Club 20 justifiably worries about the CEP’s impact on electricity rates especially in rural Colorado, recalling the huge cost of HB10-1365 the Clean Air, Clean Jobs Act, Xcel’s previous fuel switching scheme:

The current Colorado Energy Plan does not outline the impacts of the early retirement of coal units on the actual rates that consumers will pay. Since the passage of HB10-1365, consumers in rural Colorado have seen their electric bills sky rocket as electric utilities have been required to incorporate a greater percentage of renewable energy sources. Many of these residents simply cannot afford additional increases in their utility costs and we cannot lend our support to a plan that has the potential to increase rates and threatens the prosperity for Western Coloradans.

Using Xcel’s own numbers, Coalition of Ratepayers expert witness Charles Griffey found that any savings are highly speculative and don’t materialize until 2046, if ever.

The bottom line for Club 20 is that after a bit of research, the group found it didn’t have enough information on the actual cost nor real savings to make an informed decision so it revised its position on the CEP from “support” to “neutral” — a smart move that other supporters would be wise to follow.

Pueblo beware of Xcel’s promise of economic development

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Xcel Energy continues to make absurd claims about its Colorado Energy Plan Corporate Enrichment Plan (CEP).

The Coalition and others have debunked the cost-savings scam, but what about the economic development claims? One of our favorites is that the CEP, which will destroy 80 to 90, maybe more, good-paying jobs in Pueblo, is good economics for the city. To lend credibility to the claim, clearly it needs some, Xcel commissioned a self-serving study from the respectable University of Colorado Leeds School of Business.

To Xcel’s delight, the Leeds study painted a rosy picture following the loss of jobs with the closure of Comanche 1 and 2. There’s one huge problem with the study that renders the whole thing useless:

PSCo [Xcel Energy Colorado] provided data that included capital expenditures, operating expenditures, revenue requirements, and taxes for each scenario, consistent with the final Preferred Electric Resource Plan and Preferred Colorado Energy Plan as presented in the June 6, 2018 120-Day report. The research team worked under the assumption that the company provided good-faith estimates for each scenario.

Xcel supplied all the numbers. Leeds should have researched those numbers a little more before simply accepting them as “good faith estimates” because Xcel’s accounting and modeling have been thoroughly discredited in the company’s quest for approval of the CEP.

Colorado Public Utilities Commission Staff doesn’t trust Xcel’s numbers, writing this in public comments:

Staff is unable to conclude that the Preferred CEPP is more likely than not to produce savings. The modeling results presented by the Company contain a number of errors and a fundamental flaw, which are discussed below, that render the results suspect.

Colorado’s largest rural electric cooperative Intermountain Rural Electric Association (IREA) doesn’t trust Xcel’s numbers as former Moffat County Commissioner John Kinkaid pointed out in a letter to the editor that appeared in the Grand Junction Sentinel:

The plan ‘requires ratepayers to pay a premium for renewable generation levels that significantly exceed already-satisfied Renewable Energy Standard levels and is based on a deeply flawed model that inaccurately projects cost savings decades from now.’

The Coalition of Ratepayers has proven repeatedly that Xcel’s numbers are unreliable:

PSCo’s accounting has been riddled with biased assumptions, errors, and changes that are completely self-serving and call into question the Company’s credibility on numerous claims. Simply put, PSCo’s numbers are not trustworthy or accurate.

And the study itself? PUC Staff criticized it writing, “The Leeds report is not transparent, and the Company did not provide sufficient additional support to allow Staff to determine the quality of the results.”

Staff went on to provide an economics lesson that ends with its opinion of the CEP’s possible economic benefits to Pueblo:

Staff concludes that the Preferred CEPP may result in a positive economic impact for Pueblo County in the same way that economic activity is generated if a building is destroyed and rebuilt. The decision about whether a building should be destroyed and rebuilt should be made based on the value of that project, not the economic impact of an exercise that will utilize dollars that could be used for another possibly more beneficial purpose. The magnitude of the economic impact provided in the Leeds report is impossible for Staff to validate, but is likely much smaller than the estimate provided by Leeds.

Beware of Xcel’s false promise of economic development. The International Brotherhood of Electrical Workers (IBEW), Local 111, which represents Comanche employees, pointed out that during a 15 year period of time, the Leeds study indicated Pueblo likely would experience negative GDP growth.

We will know in a couple of weeks if the Colorado PUC will approve Xcel’s massive $2.5 billion fuel switching scheme. If the commission says yes, it will do so knowing that cost-savings and economic development claims aren’t true. In other words, Xcel will be allowed to get away with not telling the truth as it enriches shareholders at the expense of Colorado’s ratepayers and the hard working folks of Pueblo, who face an uncertain future.

Western Resource Advocates really corporate enablers at ratepayer expense

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Western Resource Advocates (WRA), the multi-state renewable energy advocacy group, also seems to be an advocacy group for electricity corporate oligarchies.

Two weeks ago, in what looks to be Xcel Energy’s bidding, the group filed a motion to strike a huge portion of our expert witness Charles Griffey’s testimony that completely disproves WRA and Xcel’s claim that the Colorado Energy Plan (CEP) will save money for ratepayers. Fortunately, the PUC disagreed with WRA and denied its motion.

Xcel is a Minneapolis-based monopoly with its top ten stockholders being Wall Street banks and investment funds.

Last Friday, WRA came out opposed to Nevada’s consumer choice ballot measure. According to a joint press release with the Sierra Club, Environmental Defense Fund (EDF), and Southwest Energy Efficiency Project (SWEEP), WRA said:

NV Energy has changed course on renewable energy and is proposing new solar projects that will double its current level of renewable generation by 2023. By taking NV Energy out of the electricity generation business at this critical juncture, passage of Question 3 not only will kill these important projects, but it is likely to create a cloud of legal and regulatory uncertainty that could chill the development of new renewable projects by anyone else over the next 4-5 years while the Legislature figures out the complicated details of restructuring Nevada’s electricity markets. We urge Nevadans to vote No on Question 3.

Translation: Regulators must require utilities to use expensive, intermittent sources, make captive ratepayers pay the price “at any cost” and unjustly enrich stockholders. (NV Energy is “a wholly-owned subsidiary of Berkshire Hathaway Energy Company.”) Absent regulations and mandates, consumers may not choose wind and solar on their own. Why? Because they are expensive and aren’t always available when we really them.

Interestingly, the Sierra Club, EDF, and SWEEP joined WRA in support Xcel’s CEP. This is how Intermountain Rural Electric Association described that support: “the stipulating parties’ fixation on retiring 650 MW of economic coal generation a decade ahead of schedule and at any cost has been a deeply flawed proposal from the outset.” [emphasis mine]

At any cost…these groups use environmental activism to enrich corporate oligarchies. They’ve gone from tree huggers to money grabbers all in the name of environmentalism.