Get Big Pivots

by Allen Best

Something that just a decade ago would have been extraordinary, a debate about Colorado’s last coal plant, is underway this week. The question is when, not if, Comanche 3 will close.

Xcel Energy, the operator and majority owner of Comanche 3, had proposed to continue operating the plant at Pueblo until 2040, if only on a part-time basis beyond 2030. Major environmental groups believe Comanche can be closed by 2030, maybe even 2027.

A proposed compromise agreement between Xcel and 15 other organizations involved in the discussions calls for the ramping down of operations beginning in 2022 and a final closure on New Year’s Eve in 2034. The plan would get Xcel to 85% to 87% emissions reduction by 2030, as compared to the 2005 baseline. This is ahead of Colorado’s 80% goal for 2030.

Xcel is Colorado’s largest electrical utility and a supplier to many smaller utilities, including Holy Cross Energy, which serves the Vail and Aspen areas, and Yampa Valley Electric, which delivers electricity to Steamboat Springs and Craig.

Disagreements remain about how soon Comanche 3 —which is partly owned by electrical consumers in the Roaring Fork and Eagle valleys— can be retired and other topics. Western Resource Advocates contends that both energy economics and technologies are evolving so rapidly that a 2029 retirement may be possible. The other 10 parties who declined to join the settlement have various disagreements, including independent power producers who believe Xcel wants to own too much of its own generating capacity.

The Colorado Public Utilities Commission, which is hearing eight days of testimony, wrapping up on Dec. 17, will probably issue a decision in February.

What a pivot this has been. In 2004, when Comanche 3 was approved, Colorado voters approved the renewable portfolio standard of 10%. Xcel vigorously opposed that mandate. Then wind and solar prices began declining until by 2017, they undercut coal. Utilities had also become confident they could integrate high levels of renewables without sacrificing reliability.

Eight coal units in Colorado likely will close by 2030 or, in the case of Pawnee, a plant at Brush, converted to natural gas. That will leave just Comanche 3.

Two major elements in the 32-page settlement agreement being reviewed by state regulators stem from laws approved by Colorado legislators since 2019. One is the social cost of carbon, the other just transition.

Social cost of carbon, currently set at $68 per short ton of carbon dioxide emissions, seeks to apply the true cost of atmospheric pollution from burning fossil fuel to decisions such as whether to build a new natural gas plan. The settlement agreement proposes to take this a step further, applying the social cost of carbon to decisions about whether to operate Comanche 3 beginning in the summer of 2022.

If accepted by the PUC, this likely will be the first time that social cost of carbon has been applied to operation of any fossil fuel plant in the United States. With this filter, Comanche 3 will be used less because it will be less economically to do so.

Just transition also will be a central element in retirement of Comanche 3 and also the units at Hayden. The idea, first defined in 2019 legislation, is that communities that have been providing energy will not be left behind.

Pueblo and Pueblo County both depend upon the property tax base of the coal plants. Xcel agreed to continue to pay tax money, even after Comanche 3 closes in 2034, to leave those two taxing entities whole. Xcel may be able to replace that lost tax base with new renewable energy generation, though. The landscape around Pueblo, one of the most reliably sunny places in the West, is fast becoming a sea of solar panels.

Holy Cross Energy emerges in strong position in this proposed settlement. It owns 8% of Comanche 3, but wants to be 100% renewable by 2030. Those facts seem incompatible. Bryan Hannegan, the CEO, explains that the settlement agreement would permit Holy Cross to replace electricity from Comanche 3 with new renewable generation. There will still be a gap, as cost-effective 100% renewable generation is not yet possible, but Hannegan says he believes technologies will evolve in the next few years to allow Holy Cross to achieve its 2030 goal.

As for the debt of Holy Cross on Comanche 3, the cooperative has accelerated payments. Those payments were originally scheduled to continue until 2070, but Holy Cross now expects to pay off its debt by 2042. Hannegan says the repayment schedule may be further accelerated.

Hanging over the video-conference hearing is the unsettling December weather after a hot, smoky summer. This is December in Colorado, and it’s not winter yet,” says Gwen Farnsworth of Western Resource Advocates. “Everyone in this proceeding is going to have that in mind.”

This column was published in The Aspen Times on Thursday. Look for a longer, deeper breakdown of this plan on this website before this weekend is out. 

Allen Best
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