Is the new PUC more favorable to renewable energy?

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The Colorado PUC is currently evaluating Xcel Energy’s use of renewable energy sources as part of its 2016 Electric Resource Plan.
Wikimedia Commons

The public hearing of the state Public Utilities Commission (PUC) started promptly at 4 p.m. on a Wednesday evening to a standing-room only crowd. By all accounts, attendance was impressive.

It was the first day of February, and the first public hearing for Jeff Ackermann, the newly appointed chairman of the PUC. Ackermann called the hearing to order, and Steve Szabo, the first in a long list of people who’d signed up to testify, approached the stand. Over the next two hours, nearly two dozen citizens — people from their 20s into their 70s and from across industry sectors, including a farmer, a biologist, engineers, state and federal policy makers, a financial professional, a preacher and more — would direct their data-heavy, impassioned, sometimes-philosophical entreaties to the three PUC commissioners.

As they took turns at the microphone, a clear, unanimous alignment emerged: Every person who spoke expressed opposition to Xcel Energy’s 2016 Electric Resource Plan (ERP). The plan elaborates how Xcel, the utility that provides electricity to Boulder and the Denver Metro area, proposes to meet its customers’ electricity needs through 2023 and is currently undergoing a long evaluation process at the PUC.

Several key criticisms of the ERP emerged at the hearing, including: the lack of sufficient proposed renewable energy to be added to the electricity grid, the lack of sufficient proposed new energy storage capacity, and concerns around the complex financial performance methodology behind Xcel’s cost models.

The PUC has no legal obligation to consider the contents of a public hearing in its decision-making process, but the expertise, depth and alignment of views expressed during this hearing seemed to have an impact on the commissioners.

“I’ve never seen a public hearing mentioned more than once the following day, and it has never been referred to directly as a basis of questioning that I’ve ever seen,” says Leslie Glustrom, of the nonprofit group Clean Energy Action, who also attended the Xcel proceedings at the PUC the following day. Glustrom is a seasoned advocate for renewable energy policy at the state and local level, and was instrumental in calling for the public hearing in the first place.

“We now have a PUC that cares about what the public has to say,” she says. “And as it turns out, the public has a lot to say.”

Plus, with Ackermann as chairman, a position he was awarded in January after nearly four years as director of the Colorado Energy Office, Glustrom and others are expressing hope that this PUC will be more favorable to renewable energy.

First in line to speak, Szabo, of Longmont, highlighted the need for more clean energy in Colorado’s power grid and the economic case to back it. He focused on the price per kilowatt hour — or, the price of consuming 1,000 watts of energy for one hour — for renewables versus fossil fuels.

“In 2015, the combined average price for subsidized wind and utility scale solar was about 3 cents per kilowatt hour for a 20-year power purchase agreement. The combined average price for subsidized coal and natural gas is about 4.7 cents per kilowatt hour,” he said, reading from prepared remarks. “If you look at the unsubsidized cost of energy, wind and utility-scale solar are still the lowest cost… Any Electric Resource Plan that doesn’t increase clean energy resources and doesn’t drastically reduce fossil fuel consumption is not in the best interest of Coloradans.”

Rick Tazelaar, an engineer from Boulder, drilled deeper into the economics of renewable energy generation in Colorado.

“Their (Xcel’s) own models show that adding 1,000 megawatts of wind energy during the resource acquisition period can lower present value of revenue requirements by $590 million,” Tazelaar said. In other words, allowing more wind power on the grid will dramatically lower the bill for ratepayers, because ultimately it’s Xcel ratepayers who cover that present value of revenue requirement, or PVRR, when they pay their electric bill. “The existing infrastructure can accommodate even more wind than what is being proposed.”

Other commenters referenced the state statutes guiding the PUC process referencing state regulations governing electric resource planning, which include specific language around clean energy.

“The Colorado revised statute section 40-2-123 1A and PUC Rule 3601 give you strong guidance, by calling for developing a cost-effective resource portfolio using the fullest possible consideration of clean energy technologies in order to achieve the lowest present value revenue requirement,” said Julie Zahniser, board member for Clean Energy Action. “It’s time to replace expensive, polluting fossil fuels with competitively bid clean energy so the lowest present value of revenue requirement can be achieved.”

Building on the economic and legal arguments, Larry Milosevich of Lafayette condemned Xcel’s ERP as “insufficiently forward-looking,” and asked the commissioners to reject it on those grounds.

“Xcel’s Electric Resource Plan is essentially a status quo plan, yet it is being offered at a time when ratepayers and forward-thinkers on energy are imploring companies and regulators to accelerate the transition to a 21st century grid, powered by renewable energy,” he said. Currently, renewables comprise just 22 percent of Xcel’s energy generation capacity. “Xcel has chosen not to boldly lead the way toward a clean energy economy, and therefore it falls to the PUC and the legislature to lead.”

Macon Cowles, former Boulder representative to Denver Regional Council of Governments and former Boulder City Council member, dove into the complex and somewhat obscure financial equations behind Xcel’s proposal. He addressed the question of Xcel’s “discount rate” — that is, the rate used to determine the future value of assets in present value terms, based on perceived risk. Xcel uses a discount rate of 6.78 percent in its economic projections, which Cowles and others said is too high.

“Normally, we’d use a high discount rate on riskier assets, and a lower discount rate on safer assets,” he said. “If you apply a high discount rate it tends to make the appearance a lot cheaper for these fossil fuel plants.”

In other words, with a lower discount rate, Cowles, Glustrom and others said, the PUC would see how investing now in renewable energy to avoid billions of dollars of future fossil fuel costs. Cowles implored the PUC to hire an independent economist to assess whether the use of this high discount rate is appropriate.

By the end of the public hearing, more philosophical appeals emerged.

“Perhaps you’re wishing you could shrink from the truth of what the consequences of your decisions mean, for Colorado and for our future. Perhaps you wish these decisions were not on your shoulders,” said Karen Conduff, a lifelong activist two days short of her 60th birthday, painting a picture of environmental urgency. “I hope that you all realize the gravity of what we are faced with, and choose wisely.”

Time will tell. Already about eight months in, the ERP deliberation at the PUC is far from over. Still, advocates are buoyed.

“What we did the other night was beyond exceptional,” Glustrom says. “This is a pretty bright light in a pretty damn dark world right now.”