Originally published on thehill.com

Just because President Obama’s controversial and costly Clean Power Plan is dead at the federal level doesn’t mean Colorado ratepayers are out of financial danger. Nearly 1.4 million state electricity customers await a Colorado Public Utilities Commission (COPUC) decision on Xcel Energy’s legally tenuous Colorado Energy Plan (CEP).

With COPUC approval, Xcel, the state’s largest monopoly utility, plans to shift its generating portfolio from away from majority hydrocarbons (coal and natural gas) in favor of industrial wind, solar, and battery storage.

Besides building out industrial wind and solar, the $2.5 billion CEP would retire prematurely 660 megawatts (enough to power roughly 660,000 homes) of relatively young, low-cost, highly-utilized, environmentally state-of-art coal-fueled power plants.

The company makes the wild claim that the CEP will save ratepayers money or at the very least not cost anything. That claim is one of the reasons why my employer, the Independence Institute, is leading the Coalition of Ratepayers, a Colorado non-profit concerned with issues impacting small business and residential ratepayers that otherwise have no advocate and no voice.

Our coalition petitioned and was granted intervenor status in the CEP proceeding in front of the commission.

Coalition witness Charles Griffey, a nationally recognized electric utility expert, discovered Xcel has its thumb on the financial scale, titling it in the company’s favor. 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 and transmission costs; and a legally questionable accounting gimmick that would use funds from a renewable energy fee to pay for the coal plant retirements.

Further, Xcel is doing this without state legislative approval, something the company a year ago said should be the purview of the Colorado General Assembly.

“If we are going to fundamentally restructure the way that we do resource planning in Colorado … then that is a question for the General Assembly,” stated Xcel VP Alice Jackson in Jan. 30, 2017 written testimony to the COPUC.

Yet, the General Assembly rejected such a plan during the 2017 legislative session, which ended in May. By summer 2017, Xcel didn’t believe it needed legislative approval. Instead, the company is relying upon a Gov. John Hickenlooper executive order issued on July 11, 2017, as its authority to seek regulatory approval of the CEP. The order directs Hickenlooper’s executive branch agencies to cooperate with any company that wants to voluntarily reduce carbon emissions.

Watch what you wish for — circumventing the General Assembly is dangerous territory.

If the COPUC, whose commissioners are appointed by the governor, goes along with this scheme, they would clear the way for future governors to do the same thing on the backs of captive ratepayers.

The next governor could issue an executive order voluntarily asking for 100 percent renewables, which we’ve calculated to cost $44.88 billion dollars just for the conversion, or 100 percent nuclear, which is the logical choice for those who claim to care about emissions, or, perhaps, 100 percent coal.

What the CEP really reveals is the dirty secret of monopoly utilities. With flat or declining retail sales revenue due in part to conservation efforts, for-profit monopolies must build on the backs of captive ratepayers in order to survive financially. Ultimately their fiduciary responsibility is to shareholders, not ratepayers.

The CEP is all about Xcel building and adding to its asset base on which the company earns an authorized return on equity of nearly 10 percent. This plan allows Xcel to own 50 percent of the new renewable and 75 percent of natural gas capacity, while at the same time recovering the cost of early retirement of perfectly useful coal generation.

If extra power is needed or even if more wind power is desired, Xcel could just purchase excess energy from other suppliers in more of a market situation, which is cheaper for customers but doesn’t provide more profits for Xcel shareholders.

Colorado electricity consumers have nowhere to turn. They can’t choose their provider, and Colorado’s Office of Consumer Counsel, once considered a consumer watchdog, signed on to the CEP without adequately vetting the plan.

Since 2006, Xcel’s assets have increased a whopping 77 percent. The company’s profits have increased 93.89 percent, and profit margins have increased from 12 percent in 2006 to nearly 22 percent in 2016. Also impressive has been Xcel’s profit per ratepayer, which has jumped 76.7 percent from $178.09 in 2006 to $314.75 in 2016. All of this with low load and customer growth.

If Xcel had any competition, we’d be applauding them for doing so well in a tough market. But they don’t, and it’s why we formed the Coalition of Ratepayers.

Fighting a monopoly like Xcel isn’t cheap. It will cost the coalition hundreds of thousands of dollars. Considering we’ve already kept $88 million in consumers’ pockets rather than the bank account of a monopoly utility, we think that’s a pretty good return on our investment.

Amy Cooke is the executive vice president and director of the energy and environmental policy center at the Independence Institute. 

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 andsave 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. She is also a senior fellow with the Independent Women’s Forum in Washington, D.C. She can be reached at amy@i2i.org.

Article originally published on Complete Colorado Page Two.

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.