The Colorado Public Utilities Commission made a terrible mistake in approving a massive, 95-mile, high-voltage power line which Xcel and Tri-State falsely promoted as a green project.
This unnecessary white elephant project will generate hundreds of millions in profits for Xcel’s owners while sticking ratepayers with the bill. It also burdens San Luis Valley residents and all Colorado citizens with a permanently scarred landscape past the Great Sand Dunes, alongside our state’s third-highest mountain, Blanca Peak, and over iconic La Veta Pass.
The PUC brazenly overruled the recommendations of its own administrative law judge, internal legal guidance and policy counsel by removing a ratepayer protection condition that would have guaranteed a minimal amount of energy for the $180 million line within 10 years of its completion or Xcel would have to refund 50 percent of its cost to ratepayers (still profiting; just not quite as much). Instead, the ratepayer now guarantees all miscalculations and overbuilding.
This is a setback from past practices, when utilities were not allowed to force ratepayers to finance speculative projects. Xcel even threatened its own regulators with abandoning any transmission improvements for the San Luis Valley unless the PUC would force the public to guarantee its profit on this particular mammoth line.
In economic theory, if a corporate player controls the profit margin, has no competition, and no risk of payment while being instantly reimbursed for any capital outlay, it will try to maximize its monopolistic “utility” by expanding as fully and quickly as possible. The energy companies are playing by this rule book, with the PUC blessing the deal.
Xcel does an excellent job of misstating the issues with this transmission line, but the truth can be found by following the money. The ugly fact is that the more expensive a transmission project is — and, as a consequence, the higher utility rates become — the more profitable it is for Xcel. In its reports to shareholders, Xcel extols transmission lines as one of its top profit opportunities. Xcel, with the PUC’s help, has the extraordinary privilege of dictating double-digit rates of return on their equity investment in transmission — costs the ratepayers bear. These extraordinary guaranteed profits to energy shareholders are added to customers’ rates as soon as a shovel hits the ground. This is an outrageous business model today where guaranteed returns are low-yielding and conflicts of interest, especially involving the public, are normally intensely scrutinized for self-dealing.
As an investment manager, I have watched such government-aided partnerships devolve into greedy corporate overreach. This is classic, monopolistic, naked greed under the guise of a laudable civic cause, enacted through carefully crafted, heavily lobbied political consensus. Think of the mortgage banking fiasco and Fannie Mae and Freddie Mac, or of BP’s off-shore drilling, two recent examples of profit-driven fiascos that preyed on the public’s hopes for affordable housing and cheap, domestic oil. Think Xcel, along with the PUC which provides the fig leaf for this boondoggle.
Xcel’s corporate presentation of its transmission business highlights its success in “actively influencing policy” and boasts about its “favorable transmission investment recovery” — “favorable,” not “fair” — to generate superior and safe returns for shareholders. It scores Colorado as its top state for the highest return with the lowest regulatory risk for the “timely recovery” of investments in transmission lines — what it calls “constructive regulation.” But it’s only constructive for the shareholder.
The public should have a forum that provides more insight, transparency and decision-making as to the necessity, siting and cost of utility projects it pays for. Instead, the energy companies seem to control the regulation and the mandate, determine the need as well as the site for transmission, and therefore ultimately the size of its own profits.
Hundreds of local landowners and stakeholders are opposed to this flawed plan. Many have organized under the banner of the Transmission Line Coalition and their concerns are serious, diverse and solution-oriented. The energy companies continue to ignore them.
The public has not been allowed to comment on alternatives that are more effective, affordable and protective of the pristine beauty that makes the San Luis Valley quintessentially Colorado. Instead, residents have been told to accept the damaging plan that mostly profits out-of-state energy company shareholders.
Colorado can still set the national example for how to intelligently meet energy needs with the overall environment in mind. We should come up with the best solution to strengthen energy reliability in the San Luis Valley and develop renewable energy — not cave in to an outdated, unfair, profit-driven backroom way of doing business. That’s not a responsible path forward.
Louis M. Bacon is the owner of Trinchera Ranch.
