Xcel Energy has some explaining to do

Can utility justify continued operations through 2030 after latest report of higher-than-expect costs? And what about the projected growth in demands of electricity?

by Allen Best

Colorado regulators have indicated they’re open to hearing arguments about why Xcel Energy should shutter its coal-burning unit in Pueblo called Comanche 3 before the end of 2030, the current retirement date.

In the same discussion during their weekly meeting on April 24, the state’s public utility commissioners also indicated they want to get a keener understanding of why Xcel expects such robust growth in demand in coming years when demand has been relatively flat for so long.

The coal plant is Colorado’s largest, with a capacity of 750 megawatts, and also its newest. It began operations in 2010.

Sharp-eyed Leslie Glustrom, who opposed the coal plant before its approval by the Colorado Public Utilities Commission in 2004 and has been working to get it closed ever since, submitted comments to the PUC pointing out that Xcel planned to spend $31.8 million in 2024 on the coal plant, or almost six times as much as it had originally estimated.

She asked the PUC commissioners to review the discrepancy. “It is not at all clear that spending tens of millions of dollars on a coal plant that will be retired in less than a decade is prudent,” she wrote in a filing on April 3. One option, she suggested, would be for an accelerated retirement of the plant or, at the least, make it clear to Xcel that capital expenditures of more than $5.5 million – what the company had said it would need – “will NOT carry a presumption of prudence.”

The PUC commissioners at their weekly meeting on April 24, noted Glustrom’s request. “A little startling,” said Tom Plant, one of the commissioners, of the costs. All three commissioners an openness to considering questions.

“We’ve had significant concerns that the company has either profited or been held harmless by its general inability to cost-effectively build, maintain and operate this power plant,” said Eric Blank, the commission chair .

He then mentioned “misaligned financial incentives have cost customers tens of millions of dollars and perhaps the company very little. It just seems like it’s time to align incentives on this project based on the projections” earlier in the process.

The third commissioner, Megan Gilman, described as “dissatisfying” the discrepancy between projections and costs on what she called Pueblo unit 3 – which is how Glustrom describes the plant. Glustrom contends that using the name Comanche for the coal plant dishonors the tribe. Public Service Company of Colorado, now a subsidiary of Xcel, named many of its coal plants after Native tribes from the 1950s forward: Arapahoe, Cherokee, Pawnee, and Comanche.

Some context may be useful: In this energy transition, Xcel Energy is constantly planning its next pivot. At the PUC, these are called energy resource plans, or ERPs. Xcel’s 2016 ERP yielded the decisions to close the coal plants and buy wholeheartedly into renewable resources. The 2021 ERP moved the needle further yet, but also with some additional natural gas capacity.

As part of that 2021 ERP, the PUC agreed with Western Resource Advocates about the value of having annual reports from Xcel about its operations. It’s that report that Glustrom studied.

Next up in this non-stop cycle of resource pivoting is an ERP called Pueblo Just Transition, because Xcel is supposed to see what can be done to replace the lost tax base and jobs when Comanche 3 closes. A task force created by Xcel has recommended a nuclear plant, which is improbable, given the record of enormous cost overruns for nuclear plants in the United States.

That just transition ERP is due on June 1, although Xcel wants an extension to Sept. 1.

Plant said he believed that a good process had been established for discussing the costs along with various stakeholders. Megan Gilman, the second commissioner, agreed that the reporting that Western Resource Advocates had suggested has, as modified by the PUC, been ”useful in providing additional transparency.” That, she added, will ideally result in more robust and accurate “inputs” in the next round of resource planning.

After studying the same report, Eric Blank, the chairman, expressed skepticism of Xcel’s projected growth in demand, what in the electrical world is called load.

Xcel projected compound annual growth of 3.5% over the next 10 years. By way of contrast, actual energy growth in 2023 was 0.3%, according to a recent investor report, basically a 10^th of the current forecast.

“Maybe we’ll see growth in sales with beneficial electrification and data centers, but it appears that it hasn’t show up as such,” said Blank. “Really, the company is forecasting levels of sustained growth that we haven’t actually seen during the 30 years I’ve lived in Colorado.”

Gilman also said that if Xcel projects increased demand for electricity, it should also be forecasting reduced demand for gas. “Not to say all of the growth in the electric system is a reduction on the gas system. There are others, too. You’ve got EVs, you’ve got larger power users that show up, too. But we’ve got to be able to match up this information.”

Counterintuitively, Blank also expressed concern about resource adequacy in coming years. Xcel has projected a gap between of 250 megawatts in capacity between generation capacity and peak demand in 2028.

If that is the case, he said he wants to see Xcel prepared to “quickly execute” for backup plans to bring new natural gas generation capacity on line. “I’d request the company make sure that there is one or more fully developed and permitted gas (units) that can quickly be built if needed.”

Blank also pointed to gains made as a result of participation by Xcel Energy in the Western Energy Imbalance System market.

“While the purchase and sales benefits were quite limited, just a few million dollars, I would point out that the reduction in renewable energy curtailment of over one million megawatt-hours is significant,” he said. “This curtailment reduction benefit to me appears to be in the tens of millions of dollars and so quite significant. I’d just say it’s great to see Colorado start to realize some of the benefits from these regional markets.”

Why support Big Pivots?

You need and value solid climate change reporting, and also the energy & water transitions in Colorado. Because you know that strong research underlies solid journalism, and research times take.

Plus, you want to help small media, and Big Pivots is a 501(c)3 non-profit.

Big grants would be great, but they’re rare for small media. To survive, Big Pivots needs your support. Think about how big pivots occur. They start at the grassroots. That’s why you should support Big Pivots. Because Big Pivots has influence in Colorado, and Colorado matters in the national conversation.