Perspective: Xcel’s plan to close Comanche power plants is a dud for Coloradans»

When a big, out-of-state electric utility hatches a scheme to rake in over $100 million in profits off a captive Colorado customer base, Coloradans should be skeptical.

This is especially true when the utility’s plan locks in its huge profits up front, but then requires Coloradans to bear the risk of speculative future savings. Which is exactly the case under Minneapolis-based Xcel Energy’s proposal to close the Comanche 1 and 2 coal power plants in Pueblo and replace them with expensive new facilities that Xcel plans to build.

As a regulated monopoly utility, Xcel is guaranteed an approximate 10 percent profit on every dollar it spends building new facilities. This is a tremendous incentive for Xcel to build new power facilities. Unfortunately for Xcel, Colorado already has more than enough power facilities, for now.

Xcel proposes to close two perfectly functioning power plants that generate 700 megawatts of power and then build a bevy of new facilities, with 2,400 megawatts of generating capacity, to replace them. Xcel estimates the new facilities will cost $2.5 billion to build, which would guarantee $250 million in profits for whomever builds them.

Conveniently, Xcel — in addition to supplying power to Colorado customers — is also in the business of building new power facilities. Under its proposal, the company will have an opportunity to build 50 percent to 75 percent of the new power facilities. This scheme to “save Coloradans money“gives Xcel an opportunity to guarantee itself at least $125 million in additional profits.

If Xcel’s primary goal is to save Colorado ratepayers money — as it claims — it should voluntarily remove itself from consideration for building the new facilities. If Xcel refuses to voluntarily remove itself from the process, then the Colorado Public Utilities Commission should take it upon itself to remove Xcel from the building process. This is a crucial step necessary to increase the chances that Xcel is being an honest broker in its economic estimates and professed altruism.

Xcel has a vested financial selfinterest in presenting cost estimates that justify its desire to build the new facilities. Intermountain Rural Electric Association, however, has no dog in this fight other than a desire to ensure low-cost power. Xcel is a for-profit, investor-owned utility. Intermountain, which serves different portions of Colorado than Xcel, purchases much of its power on the wholesale market from Xcel.

If Xcel truly can save customers money, then Intermountain stands to benefit as well, being able to purchase power from Xcel at a lower price and be a hero saving its customers money. On the other hand, if the scheme will ultimately raise prices, then Intermountain and its customers will be stuck paying the higher prices. Intermountain, therefore, has credible, objective motives to assess the cost impact of Xcel’s plan.

Intermountain is extremely dubious about Xcel’s claims. According to Intermountain, the plan will likely cause prices to rise. In fact, Intermountain is so convinced about this point that it actively and vociferously opposes Xcel’s new scheme. This should serve as a powerful argument against the Xcel proposal.

Xcel is attempting to “greenwash” its plan, proposing that 1,700 megawatts of its new generation be wind and solar power. Xcel’s strategy is to gain crucial allies among environmental activists and gloss over the severely negative cost consequences of its plan.

However, the plan’s environmental benefits are relatively minimal and superfluous. Colorado already is ahead of schedule meeting some the nation’s most aggressive renewable power and emission-reduction mandates in the country. Also, just over a decade ago, Xcel invested $190 million in ratepayer money in new clean-emissions equipment to make the Comanche 1 and 2 units among the most environmentally friendly in the world. Xcel justified the expense, and its profits for the expenditures, by claiming the equipment would deliver clean air for several decades. After spending so much ratepayer money on the equipment, now Xcel wants to scrap it?

Xcel’s proposal to shut down the Comanche 1 and 2 power plants will drain millions of dollars from Colorado consumers. If Coloradans support shutting down the power plants anyway, then Xcel should be removed from the process of profiting off the construction of the new facilities.