A clean-coal power plant proposed by Xcel Energy is raising questions about ratepayers’ financial exposure to an unproven technology.
The far-reaching plan to convert dirty coal to clean-burning gas as a generating fuel is being hailed by many analysts as a possible breakthrough in low-pollution power. Yet the facility’s high cost – at least $500 million and possibly $1 billion or more – as well as its experimental technology and its regulatory-approval process are raising some concern.
“I object to the one-two punch of no competitive bidding and then a sweetheart financing deal,” said Ron Binz, a utility consultant and former head of the Colorado Office of Consumer Counsel.
“To have ratepayers start paying years in advance for an unproven technology not yet in service, that’s unfair,” Binz said. “It basically gives the utility free capital provided by the ratepayers.”
A bill passed in the Colorado legislature this year gives the Public Utilities Commission the authority to allow Xcel to build the plant without competitive bidding and to start collecting costs from consumers as soon as construction begins, instead of when the plant starts producing power.
Xcel’s proposed plant would be the first in the nation to use clean fuel and capture harmful carbon emissions.
Plants using the coal-gasification technology are estimated to cost 15 percent to 20 percent more than conventional coal-fired stations.
Tampa Electric’s gasification plant in Florida was more costly to build, but because the process is more efficient than normal coal burning, the plant’s operating costs are about 10 percent lower than a normal coal-burning generator and 62 percent lower than a plant that uses natural gas for fuel, officials said. The Tampa plant doesn’t capture carbon emissions.
Xcel’s proposal has an additional benefit: The plant’s capture of carbon dioxide could save the utility and its customers money in the future if the government taxes carbon emissions, said John Nielsen of Boulder-based Western Resource Advocates.
Xcel spokesman Tom Henley said the plant’s impact on consumers and electric rates is impossible to calculate because the costs and exact technologies aren’t yet known.
But a clue comes from Xcel’s current construction of a $1.3 billion coal- fired generator at the Comanche power plant in Pueblo.
The project is the first in which the PUC is allowing Xcel to bill customers for current-development costs instead of the typical method of increasing rates after a plant begins generating power.
Under a rate hike requested by Xcel, the utility in 2007 would collect $24.4 million to cover construction-financing costs at Comanche. Those costs would account for a portion of the proposed $10.44-a-month increase in residential electric bills.
The current head of the Office of Consumer Counsel, Jim Greenwood, said his preliminary assessment of the plan shows benefits as well as extra costs for consumers.
He noted that Xcel could apply for federal financial aid of up to $200 million a year for pilot coal-gasification plants, helping lessen the share paid by Xcel customers.
“Obviously, there could still be a rate impact to consumers,” Greenwood said. “Having said that, if the plant works as anticipated, the improved environmental impact and the reduced (operating) cost could minimize the effect on consumers’ future bills.”
Any extra costs would be hard to absorb for consumers already hit by steep increases in utility bills in recent years, said Morie Pierce Smile, a Colorado spokeswoman for AARP, an advocacy group for retirees.
“Energy costs are already a burden on our members,” she said. “AARP is very concerned with the impact this plant will have on rates – and with very little oversight.”
Staff writer Steve Raabe can be reached at 303-820-1948 or sraabe@denverpost.com.
