Liddick: Eco-feel good measures cost a bunch
Hope you all had a pleasant Valentine’s Day. To help you recover from your chocolate haze, here’s a thought: Colorado’s hard-core environmentalists want you to pay a lot more for electricity. They’re enlisting the Legislature, the Public Utility Commission and Xcel as their partners in a raid on your wallet that would embarrass Billy the Kid.
What, you didn’t think Colorado’s “green energy” economy and feel-good legislation to establish our own Rocky Mountain Ecotopia would be cheap, did you? You didn’t believe that eco-righteousness could be obtained by sticking someone else with the bill? That the laws of economics could be suspended because the cause was just? Because you’d be wrong.
Instead, we’re all about to find out just how expensive it is to feel good about ourselves.
Begin with the fact that Xcel is a regulated monopoly: the latter because disgruntled customers can’t – for the most part – take their business to Bob’s Scrap Metal and Power if they believe they’re being overcharged. The former because of the latter.
In this situation, regulation is a tightrope walk. Too much rapacity on part of the utility, and consumers are going to appear with torches, pitchforks, and not much nuance as to how to parcel out the blame. Too many mandates on the “how” of electrical power supply, or too little leeway concerning return on equity, and there will be no investment money for capital improvement; eventually, the system will have to receive massive taxpayer support, or collapse.
Things were going relatively smoothly until about six years back. Return on equity was capped at 10 percent; but risk was offset by legislation which allowed Xcel (and its predecessors) to avoid risk by recapturing the costs of capital projects and fuel volitility. Rate increases were infrequent, and modest. And then …
Six years ago, the State Legislature thought it would be a good idea to mandate Xcel to provide 15 percent of its electric power from “renewable” sources. In Colorado, that meant wind and solar. The last legislature, perhaps inspired by former Governor Bill Ritter’s vision of a “new energy economy,” doubled the mandate. No one paused to ask if it was doable, and when Xcel appeared in court last year to argue that it was not, the response was, essentially, “tough.” Further actions from the State Legislature mandated the closure of certain coal-fired power plants and conversion of others to natural gas, all to be done on an immediate basis.
Not that Xcel really minds any of this. Its return on investment is guaranteed, and provisions of the above legislation allows it to simply pass on the costs of all these mandates to its customers.
The result? Your electric bill has risen more than 20 percent in the past five years, almost all of it in the form of “riders”: those extra provisions on your bill for “demand side management,” in which you pay for conservation programs, and “renewable energy standard adjustment,” to make certain you pay for renewable energy, regardless of whether you want it or not. And others. Analysts see a further 20-30 percent increase in your costs over the next five years. Xcel itself has said it plans about $4 billion worth of capital investment in Colorado before 2015, and that it plans to recapture it all in billing.
You thought you were paying a lot for electricity now. Take a good look at your last bill. Pretty soon, these are going to be the “good old days.”
As regulatory issues become more complex, there is an increasing tendency for Public Utility Commissioners to work closely with the Legislature on laws that impact Xcel. This creates, at a very minimum, the impression of a conflict of interest, an issue which came into public view in deliberations on the effects of the “Clean Air – Clean Jobs” act, which two of the three PUC commissioners had been involved in drafting. And there is the employment of retired commissioners by Xcel; a past commission chairman and several others now represent the utility.
Coloradans are better, and more practical than this. To begin with, the Legislature should realize that things like renewable energy, smart grids and repacing coal with natural gas are not without cost, and that many Xcel ratepayers cannot, and should not, pay for what are essentially feel-good measures. If renewables, or natural gas, or both, are economically viable, let them not be mandated but chosen for their economy. If they are non-competative, leave them.
And if the PUC is to regulate effectively and impartially, there must be a bright line between the regulators and the regulated. Commissioners should not draft legislation, nor should they be enployed by regulated industries for five years following their tenure in office.
Perhaps then our electic bills might settle down a bit.
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