Colorado’s Pub­lic Util­i­ties Com­mis­sion PUC fac­ing in­creas­ingly com­plex en­ergy cases

The Denver Post - - PERSPECTIVE - By Mark Jaffe

The Colorado Pub­lic Util­i­ties Com­mis­sion is an ob­scure cor­ner of state gov­ern­ment filled with ar­cane dock­ets and im­pen­e­tra­ble black boxes.

One at­tor­ney — no stranger to court­rooms and the halls of gov­ern­ment — came away from his first PUC foray say­ing the place had an “Alice in Won­der­land” qual­ity. “The PUC world is a rar­i­fied one,” for­mer com­mis­sion chair­man Gre­gory Sop­kin once told me.

Ob­scure, rar­i­fied or mad as a hat­ter, the PUC plays a piv­otal role in de­cid­ing Colorado’s en­ergy pol­icy and en­sur­ing that the rates util­i­ties charge for gas and elec­tric are rea­son­able.

The com­mis­sion, how­ever, is in state of flux and in­creas­ingly chal­lenged with com­plex cases and a rapidly chang­ing en­ergy mar­ket, say at­tor­neys and con­sumer ad­vo­cates who ap­pear be­fore it.

“It’s mori­bund,” said Pam Pat­ton, who served on the com­mis­sion from 2012 to 2015. “It needs to be pushed into a 21st-cen­tury way of do­ing things.”

Frances Kon­cilja, who joined the PUC this year, has ac­cused her fel­low com­mis­sion­ers of “reg­u­la­tory fail­ure” that leaves every rate case “a food fight with no clear rules.”

Now, Joshua Epel, who has chaired the com­mis­sion for the past six years, is step­ping down, and the term of Com­mis­sioner Glenn Vaad ex­pires in Jan­uary with no word yet on reap­point­ment or re­place­ment.

So, an un­set­tled PUC heads into 2017 fac­ing some very big is­sues in­clud­ing a $500 mil-

lion mod­ern­iza­tion of Xcel En­ergy’s grid and a pro­posal that would al­low the util­ity to au­to­mat­i­cally raise rates to meet ap­proved rev­enue tar­gets.

The com­mis­sion will have to hit the ground run­ning, but Gov. John Hick­en­looper has made it a habit to ap­point peo­ple — a ru­ral leg­is­la­tor, a board mem­ber of a ru­ral elec­tric co­op­er­a­tive not reg­u­lated by the PUC, a com­mer­cial lawyer — who while de­cent and hard­work­ing bring nei­ther knowl­edge nor ex­pe­ri­ence in the com­plex is­sues of util­ity op­er­a­tion and reg­u­la­tion.

“If you have some­one come in with­out a back­ground, it takes the staff a year to get them up to speed,” said Bill Le­vis, the for­mer di­rec­tor of the Colorado Of­fice of Con­sumer Coun­sel, adding that in states where com­mis­sion­ers are elected the sit­u­a­tion can be worse.

“It is a steep learn­ing curve,” said Pat­ton, who dis­tin­guished her­self as a quick and per­cep­tive study. “We shouldn’t be churn­ing reg­u­la­tors.”

The tu­mult at the com­mis­sion also comes at a time of great up­heaval in the util­ity in­dus­try as the old-line elec­tric com­pa­nies are fac­ing more com­pe­ti­tion and there is a ma­jor shift from coal-burn­ing plants to wind, so­lar and natural gas.

Util­ity com­mis­sions were cre­ated a cen­tury ago to reg­u­late tele­phone and elec­tric­ity mo­nop­o­lies. The idea was that it would be in­ef­fi­cient to have com­pet­ing phone and light com­pa­nies in the same ser­vice area.

One op­er­a­tor was given a fran­chise, and the util­ity com­mis­sion over­saw that the in­vest­ments the com­pany made were pru­dent, the ser­vice was re­li­able and the cost rea­son­able. In Colorado, the PUC over­sees the two in­vestor-owned elec­tric util­i­ties, Xcel En­ergy, the state’s largest elec­tric­ity provider, and Black Hills En­ergy.

Mu­nic­i­pal util­i­ties, such as those in Fort Collins and Colorado Springs, and ru­ral elec­tric co­op­er­a­tives don’t come un­der the com­mis­sion purview.

Fast-for­ward a hun­dred years, and now with so­lar pan­els and large bat­ter­ies, a home can gen­er­ate and store its own power. In many states con­sumers choose among sev­eral elec­tric­ity providers, and peo­ple in twothirds of the coun­try, but not the West, are served by large, re­gional, whole­sale mar­kets that deal in elec­tric­ity among util­i­ties in many states.

Mean­while, Colorado, in terms of reg­u­la­tion and mar­ket com­pe­ti­tion, is still in the pre­vi­ous cen­tury.

The PUC un­der Ron Binz, who pre­ceded Epel as chair­man, used so-called miscellaneous and in­for­ma­tional dock­ets to try to fash­ion broad poli­cies, but the move also courted con­tro­versy and the ire of some Republican leg­is­la­tors.

Un­der Epel, the com­mis­sion has fo­cused on a case-by-case, quasi-ju­di­cial ap­proach. The util­ity files a “docket,” say for a rate hike with de­tailed writ­ten tes­ti­mony. In­ter­venors file briefs with chal­lenges. The util­ity files an­swers to the chal­lenges. The in­ter­venors re­spond to the util­ity’s an­swers. A hear­ing is held. The com­mis­sion rules.

“If you don’t have lead­er­ship from the leg­is­la­ture, you have to do it docket by docket,” Epel said. “The prob­lem is we of­ten don’t look at the end game.”

Even with the docket-by-docket ap­proach, Epel points to suc­cesses in boost­ing re­new­able en­ergy in Colorado. The com­mis­sion did have an in­for­ma­tional docket on net me­ter­ing — the credit rooftop-so­lar house­holds get for putting elec­tric­ity on the grid — and it re­jected an Xcel call to cut the credit.

Still, go­ing docket by docket makes it hard to cre­ate co­her­ent pol­icy. Since it is the util­i­ties that file the dock­ets, they “al­ways have an outsized role in defin­ing the con­ver­sa­tion,” said Erin Over­turf, an at­tor­ney with for the en­vi­ron­men­tal group, West­ern Re­source Ad­vo­cates.

And then the quasi-ju­di­cial pro­ce­dure, as well as ne­go­ti­a­tions that can in­volve dozens of in­ter­venors in a docket, “cre­ates a cum­ber­some process that isn’t nim­ble in deal­ing with the rapid tech­no­log­i­cal and mar­ket changes,” Over­turf said.

“I was drown­ing in pa­per­work,” said for­mer com­mis­sioner Pat­ton.

So when Xcel filed five sep­a­rate, but in­ter­re­lated dock­ets aimed at trans­form­ing how it does busi­ness in Colorado — the util­ity calls the plan “Our En­ergy Fu­ture” — it cre­ated a mas­sive flood of pa­per and a real chal­lenge for over­sight and anal­y­sis.

Three of the dock­ets were set­tled in ne­go­ti­a­tions be­tween Xcel and two dozen in­ter­venors; in­clud­ing big in­dus­trial and com­mer­cial cus­tomers, the so­lar in­dus­try and en­vi­ron­men­tal­ists. The set­tle­ment will boost so­lar en­ergy in the state and test new kinds of rates for con­sumers.

The PUC re­lies a lot on ne­go­ti­ated set­tle­ments, but they are not with­out prob­lems. For ex­am­ple, when Xcel seeks a rate in­crease, it presents de­tailed fig­ures on costs and ex­penses that need to be cov­ered. The par­ties get in a room and come up with a sin­gle dol­lar fig­ure. There is no record of what got cut or what was in­cluded in the “black box” agree­ment.

Kon­cilja, in one of her dis­sents, called the process “a black box of hid­den and se­cret thought pro­cesses.” Ten years ago, the PUC, fac­ing a $107-mil­lion Xcel, black-box rate in­crease, said “the lack of trans­parency places us in a dif­fi­cult sit­u­a­tion.” Still, the rate hike was ap­proved.

The other con­cern about the ne­go­ti­ated set­tle­ment is who gets to be in the room. A rule in­ter­pre­ta­tion un­der Epel has sharply lim­ited con­sumer and cit­i­zen in­volve­ment, forc­ing re­liance on the state Of­fice of Con­sumer Coun­sel (OCC) to rep­re­sent all con­sumer in­ter­ests.

“It has be­come a fo­rum where you are hear­ing from the util­ity, big al­ter­na­tive-en­ergy providers, so­lar-in­dus­try in­ter­ests, big in­dus­trial and com­mer­cial cus­tomers,” said Bill Le­vis, for­mer di­rec­tor of the con­sumer coun­sel’s of­fice and now an ad­vo­cate for AARP. “The OCC can’t do it by it­self.”

Epel coun­ters that there are lots of dif­fer­ent groups in the ne­go­ti­a­tions. “When mu­nic­i­pal­i­ties are in­volved, they speak for con­sumers,” he said. “The OCC speaks for low-in­come folks. We rou­tinely have 20 par­ties in­volved. The PUC staff also looks out for con­sumers.”

Still, it is an un­wieldy process, and the de­mands upon the com­mis­sion grow, while the PUC staff does not, and some con­sumer groups that par­tic­i­pated in the past can no longer do so.

The com­mis­sion faces two com­plex dock­ets in 2017: one deal­ing with tech­ni­cal is­sues of grid mod­ern­iza­tion, and the other whether to change the way Xcel gets its rev­enue so it isn’t solely de­pen­dent on sell­ing kilo­watt-hours at a fixed rate.

These are ques­tions that will af­fect every Xcel cus­tomer and they need a commss­sion that is up to the task. Mark Jaffe writes on Colorado en­vi­ron­ment and en­ergy is­sues. His is a for­mer Den­ver Post re­porter.

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