By Isaac Orr
Xcel Energy, the leading provider of electricity in Colorado, is attempting to fudge the numbers to justify the closure of units one and two at the coal-powered Comanche Power Plant. Xcel wants to close these units so it can make a handsome profit from favorable government regulations that reward utilities that spend billions of dollars on industrial wind turbines, natural gas power plants, or the transmission lines needed to replace the steady supply of affordable, clean electricity at the Comanche plants.
Not only is this a horrifically bad deal for the Colorado families and businesses that rely on electricity to refrigerate their food and keep their lights on, it will also be bad for the environment, because Comanche one and two produce fewer emissions than the rest of Colorado’s coal fleet.
Many people do not realize utility companies such as Xcel Energy are only semi-private entities, because although they are privately owned, they have a government-sanctioned monopoly to exclusively operate in a given service territory. The natural tendency of any monopoly is to raise prices on consumers, because monopolies do not have to worry about losing customers to competing companies. For this reason, government-sanctioned monopolies in Colorado agree to be regulated by the Colorado Public Utilities Commission (PUC). PUC’s job is to keep utility companies honest and ensure ratepayers are not being overcharged, which is exactly what PUC must do with Xcel Energy’s attempt to shutter Comanche units one and two.
Xcel claims shuttering Comanche one and two will save consumers money, but this is almost certainly not true. In its presentation to PUC, Xcel’s economic models underestimated the cost of replacing the Comanche units by $88 million. Further, Xcel’s estimates of the cost of building new wind power were woefully inadequate.
Building wind power is expensive. Not only must companies build the industrial wind turbines themselves, they must also construct high-voltage transmission lines to transport the electricity from distant wind turbines to major population centers. In Texas, the cost of these transmission lines was approximately $2 million per mile in over the past decade. Cleary, this “oversight” by Xcel is a huge misrepresentation of the costs consumers will have to pay to replace Comanche one and two with wind and natural gas.
But how does Xcel profit from spending all this extra money on wind turbines and power plants it does not need? The answer is rate-of-return regulations, which guarantee Xcel makes about a 10 percent profit on every dollar it spends on infrastructure.
In the past, utilities were accused of “gold plating” their facilities by building more power plants than were needed to meet customer demands, causing electricity prices to rise, even though consumers did not need more electricity generation capacity. Now, Xcel is happy to “green plate” the grid, building unneeded wind and natural gas facilities and passing that extra cost on to the consumer.
It’s also important to note that despite claims to the contrary, closing the Comanche units will have a negative impact on the environment, because the Comanche units one and two have been recently upgraded with sophisticated pollution-control equipment that have resulted in their emissions rates being far below those of the remaining coal fleet.
In fact, sulfur-dioxide emissions have been calculated to be 12 percent lower at unit one and 15 percent lower at unit two compared to the remaining coal fleet. Similarly, nitrous-oxide emissions are 33 percent lower at unit one and 7 percent lower at unit two.
Xcel’s decision to close Comanche one and two before the end of their useful lives would be an economic and environmental loser for Colorado. PUC should not be fooled by the inaccurate assessments submitted by Xcel Energy and should instead consider the important value the Comanche plant provides for thousands of Colorado families.
Isaac Orr ([email protected]) is a research fellow for energy and environmental policy at The Heartland Institute.