Shortly after she began testifying before the Colorado Public Utilities Commission this month, Alice Jackson, who oversees Xcel Energy’s operations in Colorado, reported that Comanche 3 had recently been down for two weeks.
Some watching the video teleconference thought this admission telling. The 750-megawatt coal plant in Pueblo, the youngest in Colorado, has delivered electricity at relatively low cost, when in operation.
It’s been down a lot, however — including most of 2020.
Just when Comanche 3 will go down for good is among several questions the three members of the PUC must decide in their review of Xcel’s draft 2021 electric resource plan. The future of electricity in the state will be affected by the outcome of this process.
The hearings on Xcel’s plan were scheduled to run through Dec. 17.
Two weeks before they began, Xcel and 14 other parties filed a partial “settlement agreement” on the plan, reflecting key compromises.
The 30-page agreement, described by Jackson as a “landmark,” was achieved after about 12 days of negotiations conducted by video-conference and voluminous arguments and discussions in filings at the PUC.
Central to the compromise was the accelerated retirement of Comanche 3. Colorado’s newest coal plant will likely be the last one to close, depending upon what the three PUC commissioners decide — likely in February 2022.
An overview: many provisions in the agreement, including ‘just transition’ measures
Like most other utilities, Xcel has been retreating from coal in the last decade.
One of its plants, Cherokee, near downtown Denver, was converted to burn natural gas several years ago. Another unit, Comanche 1, will be retired in 2023, followed by other units in Pueblo and Hayden in 2025, 2027 and 2028. Xcel also has a financial interest in units at Craig, which are all to be retired by 2030.
When Comanche 3 operations began in 2010, they were scheduled for a 60-year run. Xcel announced in March that instead of 2070, it wanted Comanche to run until 2040. The settlement agreement calls for the plant to shutter in December 2034 — and start ramping down long before.
The settlement has many other provisions. Pawnee, the coal plant at Brush, is to be converted to burn natural gas beginning in 2026, instead of 2028, as Xcel had earlier proposed.
The idea of a “just transition,” in a way that benefits communities where electrical production from fossil fuels occurred, also shows up prominently.
Xcel is to continue to make tax payments to Pueblo and Pueblo County until 2040 — unless new generation is built to offset the property tax base lost to those jurisdictions. Xcel agreed to a $2 million study on potential alternative technologies in Pueblo to fill that future void.
Garrison Ortiz, the chairman of the Pueblo Board of County Commissioners, said the $2 million study to “analyze and determine if there is a place within our community to locate zero emission generation makes the words of ‘just transition’ meaningful to Pueblo County as opposed to an empty slogan.”
The county has shown interest in next-generation nuclear — as did PUC Commissioner John Gavan in his questions directly to Xcel executives. Commissioner Megan Gilman asked questions about the potential for green hydrogen in Xcel systems and the possibility of pumped-hydro storage.
Jackson fielded these and many other questions with the response that Xcel is studying the potential, but the technologies and other considerations may take time to resolve.
What every signatory seems to agree on: This is a giant pivot for Xcel
Mike Kruger, president and CEO of Colorado Solar and Storage Association, one of the groups party to the settlement agreement, calls the agreement and the volume of filings at the PUC “the energy transition in paper form. It’s messy. It’s complicated. It has a lot of stakeholders. That all comes through in this filing.”
What nobody disputes is that this electric resource plan represents a giant pivot for Xcel, Colorado’s largest electrical utility.
Xcel directly sells more than 52% of electricity consumed in Colorado. It also delivers power distributed by several Western Slope electrical cooperatives and some municipal providers.
The company has reduced carbon emissions 46% from 2004 levels by using its coal plants at less than full capacity and ramping up production from wind and now solar projects. This plan will put Xcel north of 80%, with some modeling showing an 85% to 87% reduction. That’s well over the 80% threshold required for 2030 by state law.
To compensate for this loss of coal plants, and prepare for increasing volumes of electricity needed for transportation and to replace natural gas in buildings, Xcel had proposed 2.2 gigawatts of wind and 1.6 megawatts of solar plus storage.
Jackson, in her filed testimony, called it the biggest change in the 150-year history of the Public Service Co. of Colorado, Xcel’s division in Colorado.
Still, support for the agreement is far from unanimous
Even though the settlement agreement reflects key consensus, support for the settlement being reviewed by the PUC is far from unanimous. Environmental groups declined to join. They argue that Xcel might actually be able to retire Comanche 3 earlier than 2034.
“During the last 15 years, the costs of clean energy choices have shifted dramatically compared with fossil fueled generation, and our understanding of the devastating impacts of climate change has also advanced significantly—including through our direct experience of shorter winters, less snowpack, extended droughts, and more numerous and destructive wildfires each year,” wrote Gwendolyn Farnsworth of Western Resource Advocates in a Dec. 7 filing.
“The Commission must retain its authority to retire Comanche 3 even sooner than 2035 in a future proceeding, to protect customers and the climate,” Farnsworth wrote.
Others have raised different issues. A prominent line of questioning of Xcel executives was from Mark Detzsky, an attorney representing the Colorado Independent Energy Association, one of the industry groups unhappy with Xcel’s plans. His questions suggested that Xcel will feather its nest by building new generating capacity to add to its assets, when wind farms built by others can be completed by third parties more effectively.
Will Coyne, director of the independent power producers, was more blunt in a Dec. 6 filing with the PUC. He accused Xcel of “overreaching” and using “hardball tactics” in negotiations that produced the settlement agreement.
That agreement, said Coyne, “takes a generational opportunity with the laudable goals of decarbonizing the electric sector by expanding Colorado’s renewable generation and retiring aging coal plants — and guarantees that the transition will be considerably more expensive for ratepayers than it could otherwise be.”
To be an example of decarbonization to the rest of the country, he added, the agreement needed to be modified to remove Xcel’s edge in developing new wind projects. Further, he added, the “agreement results in a $626 million utility ownership blank check” to Xcel.
Also in question is how much natural gas generation Xcel will put on line to replace the lost coal generation. One Xcel witness testified that it’s unlikely the company will actually build new natural gas plants.
Many questions had to do with the social cost of methane — a new metric adopted by Colorado legislators in 2021, likely a first in the United States — in evaluating what generation is built and, in some cases, what type of generation is used. In addition, Xcel Energy has agreed to use the social cost of carbon for an 18-month period beginning next summer in determining when Comanche 3 operates and at what level.
Jack Ihle, the company’s director of regulatory and strategic analysis, said Xcel aims to get fugitive emissions down to 0.25%, a four-fold reduction from current estimated levels. The company is also moving toward tighter protocols in a program called “responsibly sourced gas.”
Opponents in Boulder are prominent in the discussions. What don’t they like?
Notable among the signatories to the settlement agreement was Holy Cross Energy – the electrical provider for the Vail and Aspen areas – which owns 8% of the Comanche 3 plant, and the cities of Boulder and Denver. Despite its ownership stake, Holy Cross has a formal goal of being carbon-free by 2035.
Boulder has a similar goal, and it has been prominent in the discussions. Boulder residents were amply evident in a public listening session on Dec. 2, and their opinions were notable in letters filed with the PUC.
“PUC should hold Xcel to the most aggressive possible timeframe for transition away from fossil fuels,” wrote Jacques Juilland of Habilis DesignBuild in Boulder. “2030 should be the expected transition date.”
Boulder, the municipality, was a party to the settlement agreement as noted. The agreement commits Xcel to working with Boulder to develop a program design for a so-called “Zero Emissions Community Portfolio Program.” If agreement is reached on the design of that program, Xcel will present it to the PUC no later than June 2022.
In the Dec. 2 listening session, prominent Xcel watchdog Leslie Glustrom criticized Boulder representatives for signing the settlement agreement without first consulting the Boulder City Council, or at least municipal committees charged with climate action work.
In a statement, Jonathan Koehn, the city’s interim climate initiatives director, defended the agreement as one that “largely met the city’s objectives, namely guaranteeing the closure of Comanche 3 no later than 2035. It sets a firm line in the sand.”
The agreement also “leaves the door open for an even earlier retirement and preserves the city’s right to advocate in the future for more reductions in greenhouse gas emissions,” he added.
Koehn’s statement continued:
“While not explicit in the settlement, there are a number of components that, taken together, are expected to minimize the need to acquire new natural gas assets and to go above and beyond the emissions reductions that Xcel is projecting. Examples of this include additional scenarios that would be presented to the commission; the commitment to work with Boulder on a program to close ours, as well as other communities’ emissions gaps; and the addition of using the social cost of carbon in dispatching strategies.”
In a nod to the criticism by Glustrom, Koehn said the city is “committed to sharing with the community as much as it can throughout this process, within the rules of often confidential settlement discussions.”
Xcel’s Ihle, in a filing before the settlement agreement, had signaled an interest by the company in figuring out a way for Boulder customers to achieve faster, deeper reductions — but at a cost.
“I do note that Boulder’s request here represents something that the Company and the Commission should continue to consider – certain communities and customers would like to go farther and faster on emissions reductions than even our ambitious Preferred Plan would take the system,” he wrote of Xcel’s original plan, which included a later retirement of Comanche 3 and a later conversion of Pawnee to natural gas.
The next step in 2022 is called Phase II, during which Xcel will solicit bids for projects after the PUC has made its decision. Ihle called this phase a “potentially viable pathway to connect such customers and communities to attract resource bids while creating more investment opportunity for clean generation and storage in Colorado.”
These additions, he went on to say, would be at the “added cost to the customers who want them, not to (Xcel’s) general body of customers.”
Here is the full settlement agreement on Xcel’s electric resource plan:
This article was republished and edited as part of a collaboration between the Boulder Reporting Lab and Big Pivots, a nonprofit that covers energy and other transitions in Colorado and beyond, made necessary by climate change. Big Pivots is published by Allen Best. Subscribe for free at BigPivots.com.