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Two of three PUC commissioners say evidence supports a 2029 closing or even sooner, while the third says too much remains unknown

 

by Allen Best

Retirement of Comanche 3, the troubled coal plant at Pueblo, was originally projected to operate for 60 years. It may not make 20.

A year ago, Xcel Energy, the operator and primary owner, submitted plans to state regulators calling for retirement by 2040. In November, Xcel and a variety of parties submitted a proposal calling  for the plant to be operated only seasonally for some years before a 2034 retirement.

All three members of the Colorado Public Utilities Commission on Monday indicated they are open to an earlier retirement of the 750-megawatt unit, Colorado’s largest that began operations in 2010. Two commissioners strongly indicated they favored 2029.

The third, Eric Blank, the chairman of the commission, was more cautious, indicating his opposition to locking in a retirement date.

“I just urge you to think long and hard before we do anything that sort of forces more requirements and early retirement,” he said.

No decision was made, and one compromise that Blank argued for would allow the decision to be punted for a year or more to when more information is known.

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“To me, there’s just too much uncertainty around fuel prices, new technology, clean energy economics, environmental policy, and the company’s ability to effectively operate the project,” said Blank, an attorney.

That last point was a reference to the repeated problems that Xcel, the operator and primary owner of Comanche 3, has had in its 12 years of operations. The plant was down for repairs for most of 2020. Earlier this year, it went down again.

Those problems were the basis for Commissioner John Gavan’s call for ordering Xcel to decommission the plant by 2030 or sooner. “I am looking through the lens of reliability,” he explained. “The record is robust enough to raise major concerns about reliability.”

In other words, Xcel says it wants to keep the coal plant in its fleet to ensure reliability to meet peak demands.

Blank doesn’t want to hinder the company’s ability to make good on that reliability if it needs the coal plant to deliver it. For the PUC to make that judgment, he said, would be a precedent—and shift responsibility from Xcel to the PUC for ensuring reliability of electrical deliveries.

Gavan says that the record of Comanche shows it has been anything but reliable.

In the middle, Commissioner Megan Gilman said she strongly favored a 2029 retirement. She said enough evidence has already been presented that retirement by 2030 would both lower costs to Xcel ratepayers and reduce carbon dioxide emissions. Gilman did concede additional modeling—but only if that modeling isn’t constructed in a way to favor continued operations until 2034.

If Comanche 3 makes it to 2034, it will be the last coal plant operating in Colorado. Four units in the Yampa Valley — at Hayden and Craig —are currently slated for retirement between 2027 and 2030.

Regardless of when Comanche 3 is retired, the commissioners showed solid agreement that they want Xcel—ultimately its ratepayers—to pay property taxes for the coal plant to 2040 minus whatever new tax base results from solar and other infrastructure added in the interim. The intent is to keep Pueblo and Pueblo County taxing districts whole through the energy transition.

Some background

The commissioners have been taking testimony for the last year in what has been described as the most substantial proposal by a utility in Colorado. Xcel, the state’s largest utility, responsible for well more than 50% of all electricity sold, submitted a plan that calls for more than $7 billion in new generation and storage capacity.

This is on top of a plan for up to $2 billion in new transmission to connect new wind farms and other generation and storage facilities on Colorado’s eastern plains with consumers along the Front Range and other Xcel service territories across Colorado.

The utility’s proposed electric resource plan would bring carbon emissions of its generating resources down 87% by 2030 as compared to 2005 levels, a few steps better than the 80% mandated by a 2019 law.

Prices of first wind and then solar have plunged along a steep slope that is now being paralleled by storage. As Popular Science noted last October, citing data from Lazard, lifetime costs of new wind farms dropped 71% in the last decade while solar costs have declined 90%.

Lowered costs to ratepayers may be possible as Xcel decarbonizes, although that has not been the case so far. However, the lower cost of renewables has kept rate increases lower than they otherwise would be.

Xcel and other utilities have learned how to integrate higher and higher levels of renewables without imperiling reliability. There’s a limit, though. Utilities say as they approach 90% renewables penetration they will need access to broader markets, improved storage, or the reliability of fossil fuels.

Xcel also proposes 800-megawatts of new natural gas combustion plants at a cost of close to $1 billion.

Blank advised his fellow commissioners that there might be tradeoffs. Removing Comanche 3 earlier might result in more gas combustion that might be around for decades.

This was the first of several meetings where commissioners, prohibited by law from communicating outside of meetings, began comparing notes. One thing they quickly agreed upon was that they weren’t going to endorse all parts of the settlement agreement submitted last November by Xcel along with the Colorado Energy Office, Pueblo County, and some industry, labor, and other groups.

In Colorado, the PUC regulates investor-owned utilities and, in slightly different fashion, Tri-State Generation and Transmission. Parties with an interest in the outcome can file testimony, and many thousands of pages were filed in this case about how Xcel intends to pivot its energy generation during the next three years. It files such plans every three years.

The utilities have an interest in reaching agreement with others at the table in advance of deliberations by the commissioners. In this case, only a partial and non-unanimous agreement was reached. Most significantly, the Sierra Club, the Natural Resources Defense Council, and the Western Resource Advocates all objected to several provisions, including the 2034 retirement of Comanche 3.

“The settlement makes at least three choices that will both increase costs and increase emissions,” wrote the Sierra Club and Natural Defense Council attorneys in a joint filing submitted in January. That filing called for either an earlier retirement date now, as Gavan favors, or deferring the issue to what is called phase II, next stage of the process in 12 to 18 months. That’s the compromise favored by Blank, who has also been a wind and solar developer—including a solar project adjacent to the coal plant in Pueblo.

Rejected settlement agreement

Ellen Howard Kutzer, an attorney with Western Resource Advocates, said the rejection of the settlement agreement itself was an important message.

“You are seeing an independently minded commission that will not necessarily rubber stamp a settlement agreement, particularly a non-unanimous settlement agreement,” said Kutzer. That breaks with the tradition of at least recent years, she added.

A second major element of the PUC discussion was a proposal by Blank to offer Xcel the opportunity to spend money short of construction on projects that have not yet been fully approved. The strategy he described would allow the company—with PUC oversight—to move quickly, if necessary, such as in creating a pumped-storage hydro project west of Delta.

The premise is that Colorado wants to continue to rapidly decarbonize its electrical generation, but there are so many moving parts. Among them are the advancing technology that he had mentioned, plus the relatively imminent arrival of greater integration of electrical supplies across broader regions, and rising demand for electrification of transportation and buildings.

In essence, he proposed to give Xcel the ability to hedge its bets. That idea will be worked over in a future meeting, probably in April.

Also on the table is the question of whether Xcel wants to take full advantage of a financial device called securitization that would allow it to close its fossil generating assets more rapidly without taking a financial hit.

Xcel several years ago laid out plans to close its two older coal-burning units in 2024 and 2025.

In this plan before the PUC, Xcel proposes to close its coal-burning units in Hayden in 2027 and 2028 and convert Pawnee, its coal-burning plant at Brush, to natural gas by 2026.

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