House Bill 1281 is an unfortunate attempt to force the taxpayers of Colorado to fund the shareholders of Xcel Energy in pursuit of new power-plant technology. The new technology, called integrated gasification combined cycle, or IGCC, may be an important effort to find a clean domestic source of energy. However, it is not necessary to have Colorado ratepayers foot this bill on behalf of the state’s largest utility. There are proven private businesses willing and ready to do the job. Now Xcel seeks to do an end-run around state laws, which require competitive bidding for such plants.
In Colorado, the two biggest utilities are Xcel and Tri-State Generation and Transmission. Both opposed Amendment 37, adopted by the voters in 2004 to require utilities to add more renewable power projects. As Lola Spradley, former State Senate Majority Leader, noted at the recent Energy Summit sponsored by U.S. Sen. Ken Salazar, one reason that renewable power fails to make headway in rural Colorado is that Tri-State has a stranglehold on power generation there. Xcel seems to be trying harder than Tri-State to embrace renewable power, but mainly in ways that promote its own interests.
A prime example is HB 1281, proposing for Xcel to conduct expensive studies at the ratepayers’ expense, and then build a very expensive IGCC “clean coal” power plant without bidding it out. The bill is moving quickly through the legislature because it is being misunderstood as just being “a feasibility study.” It is so much more.
The fine print of HB 1281 proposes to shift all the burden of costs with this new technology onto Xcel’s ratepayers, including the costs of replacement power generated by others if the new technology fails. The bill would pay Xcel $3 million per year, totaling $9 million for a three-year study, and then it would authorize Xcel to build a 350-megawatt IGCC plant paid for by consumers. That is a large plant: 1 megawatt serves 1,000 people.
There is no reason that ratepayers should only get the advantage of new technology like IGCC by agreeing to write an open-ended check to their local monopoly utility. The Colorado Public Utilities Commission has for some years had rules requiring utilities like Xcel to seek bids from non-utility independent power producers (IPPs) for new plants. Though many don’t realize it, these IPPs are responsible for building almost all the new generation added to Xcel’s system in Colorado over the last 10 years. IPPs now provide 48 percent of Xcel’s power load during peak periods.
When Xcel builds a new power plant, ratepayers pay whether the plant meets budget or even operates – some will remember paying for Xcel’s failed Fort St. Vrain nuclear plant when the plant didn’t produce power. When an IPP builds a power plant, ratepayers pay only when and if the plant comes on line successfully – and then only at the fixed price rate in the IPP’s bid for the plant.
As in so many other areas, competition for the right to build new power plants means lower prices for consumers – in this case, realized in the price of electricity. Competition also shifts risks from ratepayers to private power plant builders. If a private plant doesn’t work, ratepayers don’t pay.
HB 1281 is totally unnecessary. It is monopoly abuse. Instead of burdening ratepayers with an open-ended obligation to Xcel, the legislature should allow IGCC technology to be implemented in Colorado through competitive bidding. This wouldn’t rule Xcel out. The PUC’s bidding rules allow Xcel to compete as well. Of course, it would have to do so on the same terms as private power developers, and shift risks to its stockholders instead of to its captive ratepayers.
The ramrodding of HB 1281 through the legislature is ironic. Recently, at least two IPPs here in Colorado that are members of the Colorado Independent Energy Association placed bids to build IGCC plants in a PUC-mandated Xcel bidding process. These bids offered Xcel an approach that would not pass on the risks of this new technology to consumers – IPPs always assume the risk of cost overruns and technology that may not work. Xcel turned these bids down in December. In January, it proposed a very costly alternative: HB 1281.
Simply put, HB 1281 is not really about clean coal technology. It is about the traditional battle of the small competitors being outspent and out-lobbied by the big monopolies. This isn’t new, but the public needs to be educated about it.
Nicholas G. Muller is executive director of the Colorado Independent Energy Association.
