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Xcel Energy will become bigger and Colorado’s decarbonization efforts will gain traction as result of state’s first transportation electrification plan

This story was published in the Dec. 22, 2020, issue of Big Pivots, in advance of the Dec. 23 meeting of the Colorado Public Utilities Commission to decide the issues described in this story. For a free subscription to Big Pivots, go to BigPivots.com

by Allen Best

Big will be the operative word on Wednesday afternoon as the Colorado Public Utilities Commission takes up proposals for how Xcel Energy can accommodate and accelerate transportation electrification in Colorado.

Already the largest electrical utility in Colorado, responsible for 52.5% of electrical sales in 2018, Xcel will almost certainly sell more electricity as a result of the plans being reviewed by the PUC. It will become a transportation company in the sense that Shell, Conoco, and others in the fossil fuel sector are now. Transportation will become a core part of its business.

The second outcome will be a foundation for the accelerated electrification of transportation in Colorado, now the No. 1 source of greenhouse gas emissions in the state.

This decarbonization of transportation is an essential component of the state’s decarbonization roadmap.

PUC commissioners will be making many decisions, including whether to approve a $102 million outlay by Xcel or an alternative proposal for $130 million. In both cases, Xcel’s expenses would be recouped by higher rates to consumers—although the argument is also made that eventually consumers will benefit from having a more robust electrical system.

It’s complicated. We’ll come back to that.

This planning was triggered by a 2019 law. Primary architects were State Sen. Chris Hansen, a Democrat from Denver (then a state representative), and State Sen. Kevin Priola, a Republican from Henderson, in unincorporated Adams County. The law, SB 19-077, requires the state’s two investor-owned utilities, Xcel and Black Hills, to produce plans to accommodate and induce transportation electrification. Xcel, by far the larger of the two and with prior experience in Minnesota, going first. It submitted plans in May as required by the law.

The decision in Xcel’s case likely will provide precedent for Black Hills, but the programs here are expected to provide models for other utilities in Colorado who are not required by the law to submit plans.

The plans have many components, including rebates for residential customers who want to install charging infrastructure in their homes. Ditto for business customers.

There’s also a component to create charging infrastructure in multi-family housing, a substantial portion of the housing sector in metro Denver-Boulder.

Aaron Kressig, the transportation electrification manager for Western Resource Advocates, counts himself as one of those likely to benefit from this new charging infrastructure, as he and his wife live in an apartment complex.

“I would love to have an EV, but I don’t have a place to charge it. How is that going to work?”

The plan has provisions intended to assist lower-income people in this transition. But not all of those who live in places without garages are low-income. He points to Denver itself as a place with younger, more affluent people who will be more inclined to be early adopters of EVs—if the charging conundrum can be figured out. The plan proposed by Xcel and approved by Western Resource Advocate and other groups aims to open that door.

Kressig describes a great number of programs, different problems that the plan attempts to solve. Like a Swiss Army knife, he says, a great many tools are needed to solve those problems.

“This proposal before the PUC, may be the best yet in the country,” says Kressig.

“We’re on the cutting edge in seeing real policy decisions being shaped in novel ways in Colorado.”

In addition to using its experience in Minnesota, Xcel’s plan was influenced by prior work in New York, Oregon, and Michigan. “They did a good job in their research,” says Kressig.

The plan represents something of a chicken-and-egg situation for Colorado. There’s no doubt EVs are coming. But without the investment in infrastructure, it would come more slowly. The end goal is the goal of Gov. Jared Polis, in his first executive governor, of 940,000 EVs within a decade in Colorado. There are now 32,000.

“ThIs proposal won’t get us there. It’s a long journey,” says Kressig. “But it’s an important part of the journey.”

Travis Madsen, at Southwest Energy Efficiency Project, agrees that this electrification plan is an “essential piece” of Colorado’s decarbonization roadmap.

“I think the more robust the plan that the PUC approves, the faster we’re able to move forward on transportation electrification. It’s an essential part of meeting the state’s climate goals, and it has additional benefits of improving our air quality.”

Discussions among the 24 parties at the table in the PUC proceeding since May have not produced complete agreement. A very fundamental disagreement centers on what constitutes a public interest. In other words, what use of ratepayer dollars can be condoned? Xcel will come out whole; it is guaranteed a rate of return on its investment. So what investments are in the public interest?

That issue has come into sharpest focus with a revised proposal from Xcel’s original $102 million plan. The idea emerged from Xcel and the Colorado Energy Office to allow Xcel to offer rebates at the point of sale for purchase or lease of new and used light-duty EVs on vehicles of up to $50,000, as suggested by manufacturers.

The Colorado Energy Office asks for rebates of $3,000 to $4,000 for purchase or lease of new light-duty EVs and $1,500 for purchase of a used EV.

All of these programs would add 67 cents per month to the average residential bill of Xcel customers, the Denver Post reported in November.

Does the law allow vehicle rebates? One view is that investments must be limited to infrastructure. The PUC staff, the Office of Consumer Counsel, and the Colorado Energy Consumers are of this position.

The Southwest Energy Efficiency Project, among others, argues for a more expansive view of cost and benefits. Madsen cites the allowance of rebates by Xcel currently of washers and driers. He sees no difference with a car.

Those new EVs purchased with aid of rebates would produce more demand for electricity, which then brings the cost of electricity down for all consumers. It’s one of those rare triple wins: consumers, the environment, and Xcel itself, Madsen says.

But even if PUC commissioners do not approve the vehicle rebate program, the program more broadly supported will be a big win for Colorado, says Madsen.

“It would be nice, but it’s not essential. The essential piece is making sure that Xcel can make robust investments in infrastructure.”

The plan being considered by PUC commissioners also has carve-outs to assist lower-income groups in being part of the transition to vehicle electrification.

Photo at top: Colorado Gov. Jared Polis spoke in May 2019 as State Sen. Kevin Priola looked on before signing a bill that required  transportation electrification plans be submitted to the PUC by the state’s two investor-owned utilities.

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