Xcel Energy is proposing a $1.3 billion program to cut air pollution in the Denver metro area by closing aging, coal-fired power plants, just as it completes a similar $1 billion program in Minneapolis, which had one big difference — cost controls.
A sliding scale on Xcel’s returns — with the rate declining as the cost rose — and a requirement for competitive bidding were added to the Minneapolis plan at the urging of the business community.
“We were skeptical about the whole program,” said Bill Blazar, senior vice president of the Minnesota Chamber of Commerce. “The concern was that they had special statutory authority outside a rate case to recover a billion dollars.”
Under Colorado’s Clean Air-Clean Jobs Act, Xcel also would be able to recover costs outside of rate cases, which require detailed scrutiny of costs.
Two intervenors in the case, the Colorado Office of Consumer Counsel and Wal-Mart Stores Inc., expressed concerns about cost recovery outside a rate case in filings to the Colorado Public Utilities Commission.
Ron Elisner, Xcel director of construction and projects, said keeping such big projects outside of rate cases helps cut interest costs.
“Ratepayers will see a better price for the project,” Elisner said.
The Minnesota project came in about 1 percent under the $988.8 billion target and cut nitrogen oxides 91 percent and sulfur dioxide pollution 93 percent, according to company filings.
The legislation passed by the Minnesota legislature in 2001 enabled utilities in the state quicker recovery of costs for voluntary programs that cut air emissions — though no targets were set.
The Clean Air-Clean Jobs Act, passed by the Colorado legislature in April, focuses on five coal-fired Xcel plants on the Front Range with the aim of cutting nitrogen-oxide emissions 70 percent to 80 percent by 2017.
The law also promotes replacing coal-fired plants with natural-gas units.
The Minnesota law was passed as part of a tax bill, with the support of state agencies, environmentalists and Republican Gov. Tim Pawlenty, Blazar said.
“There wasn’t the hearings, the debate, the scrutiny it should have received,” Blazar said.
The Colorado law was passed in 27 days, over the protests of opponents and some lawmakers requesting more review. It had the support of state agencies, environmentalists and Democratic Gov. Bill Ritter.
“It sounds like Minnesota,” Blazar said.
In the Minnesota Metropolitan Emissions Reduction Plan, Xcel proposed closing, retrofitting or upgrading three of four Minneapolis-area plants.
The cost controls were added by the state Public Utilities Commission at the urging of business interests.
Under the sliding scale, Xcel would receive an 11.47 percent return on equity if the projects came in 75 percent below the target, 10.86 percent at 95 to 105 percent and 10.22 percent if costs were 115 to 125 percent of the target.
A requirement for competitive bidding also was added, Blazar said.
“Utilities are not as good as private companies on big, complex projects,” Blazar said. “We put in some heavy incentives to shop.”
The sliding scale was applied to each plant — two came in over budget and one under, Blazar said.
Hearings on Xcel’s Colorado plan start this week — with the question of how the utility recovers costs as an issue under review.
“There has to be a way to give incentives to the company to do the project in the most cost-effective way,” said Bill Levis, director of the Colorado Office of Consumer Counsel.
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
