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

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.