Xcel Energy has factored in a cost of $20 per ton of carbon dioxide to cover a potential tax on greenhouse gases from power it supplies to Coloradans over the next eight years.
The state’s largest utility is among the first wave of companies to include a carbon price in its cost estimates, according to a carbon- tax advocate.
In 2005, Xcel had 31.9 million tons of CO2 emissions. The company hopes to cut that to 28.7 million tons by 2017 as part of its latest resource plan.
Some lawmakers and environmentalists say a tax on CO2 emissions from fossil fuels, believed to be a primary cause of global warming, would encourage companies and individuals to reduce consumption and increase energy efficiency.
A tax also could make renewable energy such as wind and solar more cost-competitive with coal and natural gas.
The $20-per-ton figure was included in Xcel’s electric resource plan filed with regulators last week. It proposes to boost renewable generation, increase consumer efficiencies and cut coal-fired generation as part of efforts to reduce carbon emissions by at least 10 percent by 2017.
“We’re looking at a brand-new cost coming in with the likelihood of carbon taxes or a carbon cap-and-trade program, and that’s going to add to the overall cost at some point,” said Frank Prager, vice president of environmental policy for Xcel.
A cap-and-trade program would set a cap on carbon emissions, and companies would be able to sell or trade allowances.
Prager said Xcel included a price of $9 per ton in its previous resource plan, developed in 2003. Prager said reasonable industry estimates range from $10 to $40 per ton.
“From our standpoint, it’s heartening and, from a public policy standpoint, significant that they are beginning to plan this way,” said Charles Komanoff, co-founder of the Carbon Tax Center, an advocacy and research organization based in New York.
While Xcel included the carbon price with its cost estimates for resource acquisition, the company has not yet factored it into customer rates, said Karen Hyde, vice president of resource planning and acquisition for Xcel.
Komanoff said a $20-per-ton tax would translate into a cost of 1.9 cents per kilowatt hour of electricity, based on Xcel’s mid-2007 power generation mix of 64 percent coal, 27 percent natural gas, 3 percent wind, 1 percent hydro and 5 percent other sources.
That theoretically could add about $11.90 to a monthly bill based on the average residential electrical use of 625 kilowatt-hours.
In transportation terms, a tax of $20 per ton of CO2 would add 20 cents to a gallon of gasoline, Komanoff said. He said Xcel “is ahead of the pack” in carbon-cost planning.
John Nielsen, energy program director for the conservation group Western Resource Advocates, said factoring in a tax is “becoming more common because almost certainly there’s going to be some sort of carbon dioxide regulation.”
The Xcel resource plan calls for the company to add 800 megawatts of wind power and 250 megawatts of solar power by 2015.
Xcel will close two coal-fired plants and replace the generation with a 480-megawatt natural-gas generating facility. It also will seek to add another 800 megawatts of natural gas generation elsewhere. In addition, the company wants to cut 694 megawatts of consumption through customer efficiency programs.
One megawatt of coal- or natural- gas-fired generation capacity powers 1,000 homes. One megawatt of wind-power capacity supplies about 300 homes.
Xcel’s report includes cost estimates covering 40 years, though only the first eight years are included in its resource acquisition period.
The Minneapolis-based company produced three cost scenarios with varying amounts of renewable generation as part of its planning process. The company selected the highest-cost plan with the most renewables and the lowest carbon emissions, which is $321 million more expensive than the least-cost plan over the 40-year period.
An Xcel spokesman said the company will spend roughly $40 billion over the next 40 years on capital expenditures, fuel and other costs. From 2016 to 2020, Xcel estimates it will add 200 megawatts of wind power annually. The company also estimates it will add 200 megawatts of solar in 2016.
Andy Vuong: 303-954-1209 or avuong@denverpost.com
