Xcel’s plans for new power generation and transmission to face regulatory scrutiny

The Colorado Public Utilities Commission will soon consider a $15 billion plan by the state’s largest electric utility that could have long-lasting impacts on efforts to cut the state’s greenhouse-gas emissions, increase the amount of renewable energy on the grid and keep electricity affordable.

The commission is expected to make a decision by year’s end on the second phase of Xcel Energy-Colorado’s clean energy plan, which maps out the utility’s strategies for meeting a state mandate of reducing its emissions by at least 80% by 2030 in a cost-effective manner.

Xcel Energy frequently bumps heads with other parties in proceedings before the PUC, but its proposal to add a total of 6,500 megawatts of renewable energy resources and battery storage to its system has drawn praise.

One megawatt of solar or wind energy can supply electricity to several hundred homes.

“Overall, the amount of solar, wind and storage that’s being added is something to be celebrated and something we really want to trumpet to our neighboring states, that you can get to a resilient, stable, high renewables grid,” said Mike Kruger,president and CEO of the trade group Colorado Solar and Storage Association.

Gwen Farnsworth, deputy director of state advocacy with environmental group Western Resource Advocates, lauded the company’s expectations that it will reduce emissions 87% by 2030 and produce 83% of its power from clean sources by 2028. The utility also intends to take advantage of $10 billion in tax credits through the federal Inflation Reduction Act.

But Xcel faces headwinds from critics who say the utility’s proposal to own most of the new power generation will keep costs high for customers for years to come because the infrastructure costs will be added to the rates. They worry that new natural gas plants could end up being the financial albatross coal plants have become as renewable technology continues to advance.

And Eastern Plains residents whose land could be a corridor for new transmission lines to accommodate new power want their local elected officials to make Xcel build elsewhere.

“It hurts my heart to even think about this because where we live is beautiful and so many people have put their heart and soul and dreams into living out here,” said Kerry Jiblits, who lives near Kiowa.

Jiblits and other Elbert County residents want Xcel to build the transmission lines farther to the east, where fewer people live. The segment would be part of the company’s Colorado Power Pathway, 610 miles of transmission lines approved by the state utilities commission. The project also needs the approval of the counties it runs through.

“We continue to work with the community to find out what the best path forward is,” said Robert Kenney, president of Xcel Energy-Colorado. “Without getting into the specifics of Elbert County, our goal is to continue working with our community to find a mutually agreeable route.”

The 184-page clean energy plan details Xcel Energy’s preferred blueprint for meeting goals to cut heat-trapping emissions and expand renewable energy. The company has its own goal of producing carbon-free electricity by 2050.

“There are multiple benefits that make this plan exciting,” Kenney said. “It’s the size and amount of renewables we’re able to bring onboard, the additional transmission investment.”

Xcel has said it received more than 1,000 competitive bids for the projects proposed.

Xcel Energy-Colorado President Robert Kenney talks about the utility’s future in this Oct. 4, 2022, photo. Kenney says the utility’s new clean energy plan contains multiple benefits for the state.

Kenney knows there’s opposition to building new natural gas plants. He said they will be used less frequently than Xcel uses the existing plants, but the utility still needs “dispatchable” energy, which can be turned on and off as needed, to “fill in the gaps when renewables aren’t able to perform.”

Dan Haley, CEO and president of the trade group Colorado Oil and Gas Association, said it’s important that consumers can continue to rely on reliable and affordable energy as Xcel works toward the state mandates.

“Natural gas will remain a key part of this effort and serves as a potentially life-saving energy source during periods when renewables are not capable of meeting the demands of the grid,” Haley said in an email.

Fear of stranded assets

Others aren’t convinced that Xcel Energy’s clean energy future should include new natural gas plants. The company’s proposal calls for closing six older gas-fired units and building three new plants totaling 600 megawatts.

“They’re retiring some (plants) but then they’re going to build more. It doesn’t make any sense,” said KK DuVivier, a professor at the University of Denver’s Sturm College of Law and an expert on national resources and energy law.

The new gas plants could end up as “stranded assets,” DuVivier added, meaning they’ll be closed earlier than planned when they were designed, financed and built. Xcel Energy, like other regulated utilities, can seek approval to tap ratepayers to cover the costs of those assets.

The company has about $1 billion in stranded coal plants that have to be paid off, said Leslie Glustrom, a Boulder resident with the nonprofit Clean Energy Action. “It is important to not now make the same mistakes on the gas side.”

Xcel expects to close all its coal plants in Colorado by the start of 2031, but customers will shell out for years to close the books on them.

Farnsworth of Western Resource Advocates said Xcel’s proposal relies much less on new natural gas generation than originally projected. She said it might be possible to further reduce that reliance “both for lower emissions and to avoid high fuel costs.”

Even with the new gas plants, there will be a net reduction of 700 megawatts of natural gas, Kenney said. Xcel is looking at shortening the depreciation time for the plants so it can cover costs more quickly. Xcel also wants to explore blending hydrogen with natural gas in the plants to decrease emissions and potentially burn 100% hydrogen.

So-called “green” hydrogen fuel can be produced by renewable energy, but more than 90% is currently generated using natural gas. Sierra Club spokesman Noah Rott said despite “many positive elements” in Xcel’s plan, the company is asking customers to bet on speculative hydrogen technology.

“If technologies like hydrogen that could reduce emissions from gas plants don’t end up being cheap or reliable, then we can still be on the hook paying for the company’s failure to find real solutions to the climate crisis, and that only benefits the company’s shareholders, not our communities,” Rott said in an email.

Another sticking point is that under Xcel Energy’s preferred plan, the utility would own about 66% of the new facilities. Kruger, with the statewide solar and storage trade group, noted that a 2019 law requiring utilities to write clean energy plans established a target of a utility owning about half the infrastructure and the other half being privately owned. In the case of cost overruns or malfunctioning plants, a private company would bear the costs, not customers, Kruger said.

Xcel Energy has been criticized by customers, legislators and consumer advocates for seeking frequent rate increases while its parent company, based in Minneapolis, reported $1.74 billion in profits for 2022, up 8.75% from 2021. The company’s net profits in Colorado were $727 million, up from $660 million in 2021.

Xcel, which provides electricity to 1.6 million customers in Colorado, plans to ask regulators to approve a rate increase of 2.3% to help finance the plan.

Kenney said an advantage of Xcel owning the facilities is that it can use the tax credits available to utilities under the Inflation Reduction Act and the savings can be passed onto customers. “We do make profits. We don’t make outsized profits and we’re making substantial investments back in our community.”

Colorado Power Pathway

The Colorado Power Pathway, planned in several counties on the Eastern Plains and the Front Range, will be a conduit for tapping solar and wind resources detailed in Xcel’s clean energy plan. The plan pegs transmission costs at roughly $4.5 billion, not including $123 million in interconnection costs.

Construction has started on some of the transmission project’s segments and counties have approved some of the land-use permits Xcel will need. The utility is expected to submit a formal application this spring for a permit to Elbert County, where the project is proving to be a hard sell for residents.

“I have not met one person in this area who is in favor of this route,” said Jiblits, who lives 10 miles northeast of Kiowa.

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Jiblits is a member of the Elbert County Environmental Alliance Board, which opposes a route that would cut through the middle third of the county. The group has suggested routing the more than 50 miles of lines farther east where it is less populated and people’s property is measured in thousands of acres.

“Whereas here we have several landowners who are on just 5 acres of land so it’s impacting many more landowners,” said Jiblits, who has attended open houses hosted by Xcel on the project.

The eastern part of the county doesn’t have the forest and the variety of wildlife the middle part does, Jiblitz added. “We’re just saying build it in a place that makes more sense, in a place that’s not going to negatively impact so many people.”

Chris Richardson, chairman of the Elbert County Board of Commissioners, said Xcel Energy had proposed “a multitude of routes,” including one farther east that would parallel existing transmission lines serving its Rush Creek Wind Project.

“To us it seemed like the logical route to take, but it appears Xcel feels otherwise. Until we actually have an application before us, we’re kind of in a holding pattern,” Richardson said.

The county staff and commissioners will review the application. Richardson stressed the county will wait until it has the all information it needs before making any decisions. He just thinks the process could have been smoother if Xcel Energy had engaged with the community earlier.

“Probably the last six months, I don’t think we’ve had a public meeting where we didn’t hear concerns about the route,” Richardson said. “I think there was a way to approach us that would have been a lot more collaborative.”

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