Statement in Response to Colorado Public Utilities Commission (PUC) Decision to Approve Energy Plan Raising Rates on Colorado Consumers

Dec 10, 2010, 10:15 ET from Affordable and Reliable Energy Colorado

DENVER, Dec. 10, 2010 /PRNewswire/ -- The Colorado Public Utilities Commission (PUC) has chosen to mandate a piecemeal energy plan that Xcel Energy opposes because it is more expensive, less efficient and less reliable than installing proven emissions control technology on an existing coal-fueled plant.

The PUC's fuel-switching plan, approved today by a 3-0 vote, will cost Colorado families, businesses and communities approximately $1 billion more than other, more cost-effective proposals, such as retrofitting Xcel's existing coal-fueled power plants, and introduce significant reliability and efficiency risks to our electric system.

That's because this plan is dangerously reliant on natural gas. Colorado consumers currently enjoy a steady, reliable supply of electricity at rates below the national average, largely because nearly two-thirds of its generation is fueled by coal. Natural gas prices to produce electricity have been one of the major causes of rate increases over the last decade in Colorado where the cost of natural gas to produce electricity rose over 175 percent between 2002 and 2008, according to the U.S. Energy Information Administration. Under the fuel-switching plan approved by the PUC, and according to testimony submitted by Xcel, the fuel switching plan would cost almost $200 million more than the utility's most recently recommended plan.

Given the limited gas storage on the Front Range, any disruption in supply could result in disruptions in electricity use or home heating. Such disruptions in gas supply could force rolling blackouts like we experienced on Presidents' Day 2006. At best, this plan is highly inefficient. Fuel switching will require that natural gas be burned in power plants designed for coal, including a critical coal-fueled power plant in Denver, known as Cherokee 4. The approved plan allows Xcel to pass through to consumers the high costs of switching to natural gas rather than the more practical option of retrofitting the existing coal fleet with advanced emission control technologies.

In choosing the fuel-switching plan, the PUC ignored concerns expressed by its own staff and Xcel Energy about electric reliability and cost impacts on consumers. In testimony, Xcel strongly urged the Commission to "reject all of the fuel switching scenarios" and pointed out that any fuel switching scenario would be "more expensive" than continuing to use coal. Xcel went on to state, "Our concern ... is the inefficient burning of natural gas in coal boilers and the unnecessary emissions that result from this inefficiency." Xcel stated the company "does not believe that it makes economic sense to burn natural gas in the Cherokee 4 boiler for an extended period of time."

Amazingly the PUC ignored those realities and mandated the expensive and unreliable fuel switching plan anyway. As a result, Colorado families and businesses will be forced to pick up the tab for this highly inefficient plan and be subject to volatile price swings in natural gas.

According to Xcel, the fuel-switching plan will be even less efficient than its costly and already rejected "preferred plan."

As if the current fuel-switching plan isn't bad enough, natural gas advocates are urging that gas be used to replace all coal used to generate electricity. A recent study by an expert witness for the Colorado Mining Association, Dr. Roger H. Bezdek, used Xcel's own fuel forecasts to examine the potential economic impacts of an all-gas, no-coal scenario in Colorado between 2010 and 2040. The analysis concluded that fuel costs would increase by between 200 percent and 300 percent respectively and that customer costs for electricity would double or triple.

Considering these factors, one is left to wonder what benefits increasing our dependence on gas and passage of the so-called Clean Air-Clean Jobs Act really provide. This legislation was championed as a comprehensive initiative that would bolster economic prosperity and improve our state's air quality. Instead, we're left with a hefty-priced and hastily passed, piecemeal approach that does nothing to secure our energy future and puts Colorado at an economic disadvantage with our neighboring states when it comes to business retention and job creation.

An emissions reduction plan that would retrofit Xcel's existing coal-fueled units with proven environmental technologies will save Colorado ratepayers hundreds of millions of dollars and provide a stable, low-cost and reliable supply of electricity, while meeting the objectives of the Clean Air-Clean Jobs Act. This is the only viable solution.

The fact is, plans regarding the future of Colorado's energy picture should not be slapped together overnight. The PUC commissioners' involvement in drafting the legislation and its blatantly biased devotion to the gas industry have cast an unwelcome shadow over the policymaking process designed to protect our state's consumers. The PUC's fuel-switching plan is a huge mistake, and the people and businesses of Colorado will be forced to pay for this disaster for many years to come.

The fight is not over. The PUC will have a chance to revisit this before the appellate process. On behalf of the thousands of Colorado customers we represent, we will continue to raise our concerns about how best to promote energy policies that will fuel our state's jobs and economy, keep rates low for Colorado consumers and preserve electric reliability.

Affordable and Reliable Energy Colorado, co-chaired by former Colorado PUC commissioners Polly Page and Carl Miller, is a statewide coalition of public and private stakeholders committed to supporting the sustainable use of our state's domestic fuel resources to reliably meet Colorado's growing energy demands in a low-cost and environmentally-responsible way.

SOURCE Affordable and Reliable Energy Colorado