In recent years, Xcel Energy has excelled at getting government permission to leverage money out of consumers’ pockets and into the bottom line of Xcel’s monopoly profits.
They’re at it again.
Xcel is making the rounds to announce a new plan to deliver electricity to Coloradans, saying it wants to modernize its mix of fuel sources and generation facilities to reduce fossil fuels and focus on renewable energy. The company says this will give it a jump on the carbon reduction mandates coming down from the federal government. Xcel plans to ask state regulators to approve its new Energy Resource Plan (ERP) and allow it to change its fuel mix and build new facilities to implement the plan.
This news should cause Coloradans to guard their wallets and keep an eye on their utility bills.
Consider how this dance went the last time Xcel filed an ERP. (Spoiler: Consumers got the shaft.)
In 2011, Public Service Company of Colorado — Xcel’s Colorado operating company — submitted its ERP to the Public Utilities Commission (PUC) to get permission for a new energy plan. Public Service promised the ERP shouldn’t increase consumer costs. But forecasts are only as good as the assumptions and modeling they are based on, and a lot of strange calculating went into the proposal.
Public Service astonishingly forecast that Colorado’s population would decline by a quarter million residents during the covered period, arguing sluggish economic growth following the 2008 recession would drive out-migration. This let the company lower its forecast for its firm obligation load (demand for electricity).
Colorado has never experienced a declining population. In fact, Colorado’s population has steadily increased, resulting in more than 1 million new residents in the past 15 years, with approximately 280,000 of that since 2011 — a near exact opposite of Xcel’s hugely suspicious assumption.
As Colorado’s chief legislative economist Natalie Mullis observed: “No one was forecasting a declining Colorado population in 2011.”
So, what does it mean when a utility company plans to service fewer customers? It means the company can project the illusion of lower costs. But what happens when population and demand actually increase, as every reasonable observer knew they would? Prices go up. And because adding new supply is a slow and expensive proposition, they don’t go back down.
That is what Colorado has experienced. Despite decreasing coal and natural gas prices, Colorado’s average retail price of residential electricity has risen 63 percent over the past 15 years. That’s not right. Consumers’ electricity bills really shouldn’t be higher when the fuel that supplies them is getting cheaper. Unless someone is rigging the game.
Xcel has a powerful incentive to rig the game: Xcel is a regulated utility. The laws governing its operations and costs allow it to recover a higher return from building new facilities (capital expenditures) than from providing its customers with the power we rely on to live (operations). No wonder Xcel’s CEO described the current situation to shareholders as “an investment opportunity.”
Travis Kavulla, president of the National Association of Regulatory Utility Commissioners, acknowledges the game is rigged. In his Wall Street Journal columnm “How Utilities Team Up With Greens Against Consumers,” he specifically mentions Colorado.
The new game is this: The EPA announced new restrictions on carbon emissions that would shut down or re-engineer most of our energy production as we know it. The new rules are not based on any recent law passed by Congress. Rather, they are a reinterpretation of environmental laws from the 1970s.
When 26 states plus a slew of organizations joined a lawsuit to challenge the EPA’s action, the Supreme Court found the EPA’s rules so unjustified and overreaching that it issued a stay on government enforcement until the rules could be reviewed in court.
That legal process should be allowed to play out. And Xcel should not be authorized to impose these new costs on consumers before the new mandates and policies are vetted and litigated.
Cortney Crouch is a an energy economist and former military intelligence officer. She wrote this on behalf of the Independence Institute, a free-market think tank in Denver.
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