Xcel takes it on the chin in public comments

Two speakers, one from Minturn and the other from Boulder, have hard things to say about monopoly utilities

by Allen Best

Xcel Energy took it on the chin in remarks at this week’s meeting of the Colorado Public Utilities Commission.

The PUC commissioners accept public comment once a month at the start of video-conferenced meetings on Wednesday mornings. Environmental-minded groups and individuals have taken advantage of the opportunity.

This week, both Matt Scherr and Leslie Glustrom told the commissioners that the profit motive drives Xcel investment decisions to the detriment of broader goals.

Scherr was first. He lives in Minturn, the sole town in Eagle County that gets electricity from Xcel. He is also a commissioner in Eagle County, which is a member for Colorado Communities for Climate Action, a consortium of 49 towns, cities and counties.

At the outset, Scherr confided that he had no electricity that morning and hence was at a “hot spot.” He had two issues with Xcel’s energy planning.

People in the mountain valleys, he said, were trying to convert from natural gas to electric-powered heat pumps. That raises their electricity bills, and Xcel’s rates are causing their bills to skyrocket. This, in turn, will slow electrification, making it more difficult for Colorado to achieve its decarbonization goals.

Scherr’s second issue had to do with Comanche 3, the coal plant in Pueblo. Xcel owns 75% of it with smaller shares owned by Sedalia-based CORE Electric Cooperative and Glenwood Springs-based Holy Cross Energy.

The 750-megawatt unit is operated by Xcel, and it has been down — again, this time since last August. Xcel is scheduled to report to the PUC on Monday the status of repairs and perhaps the costs, too. Xcel had previously said the unit would resume operations in mid-July.

Shareholders of Xcel, said Scherr, not ratepayers, should pay this cost of “mismanagement.”

“Business owners don’t make customers pay for bad service; they fix the mistake with their own resources,” said Scherr. “Xcel has brought in record profits over recent years, so shareholders are well equipped to pay for the consequences of poor resource management.”

And instead of keeping other coal-burning units operating, he said, Xcel should purchase clean energy through the wholesale market.

Glustrom was next. She also spoke about Comanche 3, which she invariably calls Pueblo Unit Three. She regards the naming of coal units after Indian tribes a dishonor to the tribes. She doesn’t talk much at all, if ever, about Pawnee, the former coal unit at Brush now converted to burn natural gas, or the Cherokee or Zuni stations in Denver.

As for Comanche, it fit in with her familiar assertion. The century-old model for monopoly utility regulation does not serve us in the 21^st century. As espoused by Sam Insull in Chicago and adopted across the country, energy utilities can be monopolies in return for regulation by states. It works in theory. In practice, not so well.

In this quid pro quo, the state regulators commonly approve a respectable rate of return to the utilities on their investments. But do the utilities then game the system by wanting to build costly infrastructure that is unneeded? In Colorado, at least, you hear that allegation at least once a week.

“Xcel wants to spend money. They don’t want to find the lowest cost or the most effective way to get things done, and the same is true for Black Hills,” said Glustrom. “Xcel is the big dog in the room, so we often talk about them.

Xcel has metropolitan Denver and a few other places elsewhere in Colorado, from Sterling to Grand Junction. This is for electricity. Black Hills Energy delivers electricity to Pueblo and a few other nearby towns. Both also have gas utilities that differ in their service territories somewhat from that of the electric utilities.

Glustrom said that Colorado, if it has made good progress, lags other states in key metrics.

“Our rates are higher than our neighboring states, and our customer service is poor, and our reliability, especially if you live in a place like Boulder — and there’s Commissioner Scherr without power this morning — you know our reliability is frankly pretty lousy, also.”

“Many states, many really bright red states, like Texas and Iowa, Florida, are well ahead of us. And so it’s time, I think, to really recognize the constraints of that cost-of-service model,” she continued.

In other words, more competition is needed.

“So, as Commissioner Scherr pointed out, real businesses have to pay for their mistakes. They don’t come in and ask for a rate increase when they’ve not been doing well on many fronts, as you have noted many times from the bench, so I’m hoping that we can start thinking about models that allow more competition that aren’t so driven by Xcel’s incentive to make large centralized capital investments (and) to spend large amounts of money on the transmission and distribution system.”

The PUC commissioners recognize the imperfections of the existing model, she said. “I want to thank you so much for putting it into writing, as you did in the gas infrastructure plan, which is we’ve got perverse incentives under the cost-of-service model. Xcel wants to spend money, they don’t want to find the lowest cost or the most effective way to get things done, and the same is true for Black Hills.”

Beyond simple economics, why does this matter? The end game for Glustrom (and others) is the need to decarbonize as rapidly as possible.

“If the train’s leaving the station, you can’t walk and somehow expect that the train is going to wait. And when we think about climate change, that train is not waiting. The extreme weather we’re seeing now is nothing compared to what we’re almost certainly going to see in the coming decades.”

The sequence in the public session sounded like it had been premeditated, but both speakers, when contacted later by Big Pivots, denied any such planning. “Just happened. Commissioner Scherr and I don’t know each other,” said Glustrom.