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Xcel says it wants to close Hayden in 7 years. Others itch for much sooner

by Allen Best

For environmental advocates, the closing of the Hayden coal-burning power plants in 2027 and 2028 announced on Monday by Xcel Energy won’t be soon enough. Xcel ratepayers, they say, would be better off with retirements early in the decade, not later.

Contemplating the loss of property tax revenues from the plants and likely an associated coal mine, elected officials in Hayden and Routt County see that day of reckoning arriving plenty soon.

The fulcrum for this debate will be the Colorado Public Utilities Commission, which later this year will begin hearing the evidence.

Western Resource Advocates will be among those calling for earlier retirements. “Ceasing operation of the Hayden coal plant before 2027-28 could bring even greater economic and environmental benefits for the West,” said Erin Overturf, deputy director of the group’s Clean Energy Program.

The Sierra Club echoed that argument, citing a 2019 report by Strategen that found closing the two Hayden units by 2023 would save customers of Xcel and other utilities $246 million. Calculating benefits through the social cost of carbon, the benefits would increase to $1.3 billion.

At least one state senator agrees. “Let’s be blunt about it. The Hayden power plant is not economic today. It makes sense to close it as soon as possible,” says State Sen. Chris Hansen, a Democrat from Denver and among the architects of key energy legislation of recent years. “There are alternative power options that are much less costly and better for the environment.”

An even more blunt assessment came from Ron Lehr, a former PUC commissioner. “This old dog is losing money,” he said in an e-mail. “Why lose more money by waiting 7 or 8 more years to stop the bleeding. Is it because Xcel shareholders get paid to hang on, even though consumers pay more than they should?”

Leslie Glustrom, senior advisor of Clean Energy Action, said this decision should have come years ago—even before the Hayden pant was outfitted with expensive pollution reduction equipment. A 2010 law, Clean Air-Clean Jobs, accommodated continued use of Hayden after expensive retrofits.

Those retrofits, she said, served primarily to add to the rate-base of Xcel, the amount of investments that by law is used to calculate rates the utility can charge consumers. The greater the investment the utility is paying off, in theory, the more that Xcel should be able to charge customers.

“It created a false sense of hope for the school and other districts,” says Glustrom. “They could have instead spent the decade planning for the inevitable transition. That’s tragic for the many workers and families that could have used that time to prepare for a different future.”

As early as 2009, she said, it was clear that the already decreasing cost of renewable energy would justify coal plant closures by around 2015. She pointed out that Xcel then had different managers.

This is from the Jan. 5, 2021, issue of Big Pivots, an e-magazine tracking the energy transition in Colorado and beyond. Subscribe at bigpivots.com

As majority owner, Xcel operates both plants. Two other utilities, Phoenix-based Salt River Project and Portland-based PacifiCorp, own slightly less than half of the plants and their output.

In announcing the accelerated retirements, Xcel said it will work with the communities and stakeholders to explore new uses of the Hayden site that will “promote clean energy innovation and economic opportunity” in Northwest Colorado. It did not provide details.

“Hayden has been part of the Northwest Colorado community for 55 years. We are committed to supporting our employees and the region as we move forward with our clean energy transition in Colorado. We have a long track record of successfully transitioning coal plants we’ve retired,” said Alice Jackson, president of Xcel Energy’s Colorado division, in a statement.

“Our top priority is finding new roles for our workers and supporting the communities that have served us so well,” Jackson added.

The plant employs about 75 people, and no layoffs are anticipated. Instead, Xcel Energy and its co- owners will manage the transition through attrition, retirement and retraining employees in partnership with IBEW Local 111, which represents the workforce.

Doug Monger, a Routt County commissioner until Monday, said Xcel has shared some ideas with local community leaders.

“They have land, they have water, they have a workforce, they have (electrical) transmission, and they have a railroad siding into Hayden, which is available as well,” said Monger. Xcel, he added, has some things it is focusing on, “but I would rather you hear it from them than me.”

Hansen, the state senator, said he expects legislation to be introduced in the session that begins Tuesday on behalf of Xcel that provides the company a pathway to make substantial capital investments. That investment could overlap with various ideas—including those of Hansen—to make use of existing transmission lines in and out of Hayden and Craig coupled with new storage devices such as green hydrogen or other emerging technology.

A new PK-high school campus  in Hayden was nearing completion in August. Photo/Allen Best

Taking the long view, Routt County Commissioner Tim Corrigan described a continued transition to tourism and sustained attention to community infrastructure that makes the communities attractive places to people with location-neutral jobs, a process underway since the 1990s. The shift was accelerated last year by the escape of urban residents because of covid.

“I don’t view this as the end of the world. I just view this as the turning of the page,” said Corrigan. “We will adapt. The question is how well we will adapt.”

Lost property tax collections will challenge local districts to varying degrees. The Hayden School District last year collected 57% of property tax assessments from the power plant. The same goes for the local fire and library districts.

A portion of the lost revenue to the school district will be made up by the state in a process called backfilling. That process, however, will not make the Hayden School District budget whole, explains Monger.

If you lose $1 million in operational budget, the state will pick up a portion of that loss, maybe three-quarters, explains Monger, a former school board member. “You don’t stay whole.”

Of even greater concern is the ability of the school district to pay for the new PK-high school. The state doesn’t backfill any of the debt for capital infrastructure.

The property tax hit to Routt County will be relatively modest. The power plant was responsible for 5.27% of property tax revenues last year, but it has been declining over time as the coal units have aged. The largest sector is commercial and residential real estate in and around Steamboat Springs, the county seat.

 

Also questionable is whether the closing of the coal plants will mean the end of production at the Twentymile Mine—or whether the mine has enough coal to last to 2028. The production in 2019 had dropped to 2.5 million tons, a third of the production from a decade before.

Production almost certainly declined even more in 2020 as the owner, Peabody, furloughed significant number of employees in May. Production numbers for 2020 haven’t been reported.

Twentymile Mine managers told Routt County tax officials last year that the mine had reserves for only 3.5 years of production. That projection correlates with the declining valuation of the mine, says Gary Peterson, the assessor of Routt County.

Once the largest single taxpayer in Routt County, Twentymile’s payments last year were responsible for just 1.16% of the county’s total property tax revenues. Peterson expects it to be less than 1% this year.

In the area around Oak Creek and Yampa, called South Routt, the coal mine still represents a hefty portion of the tax base. But, again, it has been declining steadily. As recently as 2015, the mine represented about 40% of the tax assessment in the South Routt School District. This year, Peterson expects it to fall below 10%.

“It’s getting to the point that when the mine does shut down, it won’t be the big scary shift that it would have been 7 or 8 years ago,” Peterson says.

In theory, coal mine owner Peabody could develop the infrastructure to excavate additional coal in the area. Coal remains abundant. But the existing production resulted from a $100 million investment to develop a deeper coal seam. Another investment is unlikely given the shrinking market for coal. Too, coal may be more easily extracted from the ColoWyo Mine south of Craig, on the border of Moffat and Rio Blanco counties.

If the coal mine’s property-tax payments have diminished, they still represent a vital source of revenue fire, hospital and other taxing districts in South Routt, says Corrigan, the county commissioner from that district, who lives near Yampa. Too, there is the loss of jobs, always tragic.

That said, Corrigan says he’s optimistic about the future. Routt County has grown its ability to survive —and thrive—beyond resource extraction. The challenge will be to maintain community infrastructure, to grow the tourism economy and attract location-neutral workers.

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