Steve Pomerance

Some Camera readers have asked me questions about how regulated monopoly investor-owned utilities like Xcel work in practice. Here is some background information. Xcel Energy is a holding company that owns regulated monopoly utilities in eight states, including Public Service Company of Colorado, which is regulated by our Public Utilities Commission. Xcel makes money by investing their own cash equity (plus money derived from bond sales) in building power plants, power lines, etc. These investments are then added to the “rate base” on which Xcel is granted a rate of return by the PUC. This return is calculated based on the bonds’ interest rates and a rate of return on the equity, which, per the relevant case law, is supposed to be, “commensurate with returns on investments in other enterprises having corresponding risks.” The bonds are paid off as they come due. The invested equity is paid off in equal payments over the lifetimes of the power plants and other infrastructure. In r...

Colorado is now in a position to make a radical transformation of our whole system of generating electricity. Wind and solar have become so cheap that we can shut down all our coal plants, shift to more renewables, and still pay less for electricity, as recent studies by the Sierra Club and Vibrant Clean Energy confirm. The key is to dismantle our century-old model where the regulators (the Public Utilities Commission) operate in a reactive mode and so end up “captured” by for-profit investor-owned utilities. We need to replace this model with one where decisions are made independently and solely in the public interest. We have efforts in many states to learn from. We can see that going only halfway and leaving the investor-owned utilities with a significant decision-making role is guaranteed to perpetuate the struggles that we have here in Boulder. We will be shifting to more electric cars and heating systems, so demand for electricity will significantly increase. So we should...

I just returned from the annual International Energy Economics and Finance Association conference, where people from all over the world gathered to discuss global warming and climate change. I was on a panel discussing “securitization,” a financial tool that uses borrowing to reduce the cost of paying off utilities to shut down coal plants. Interestingly,  an op-ed I wrote  in April on the Colorado securitization bill was referenced by some people to illustrate their various perspectives. Our discussion ended up boiling down to a fundamental choice: Are we willing to pay whatever it takes to get utilities to shut down their coal plants? Or are we going to force some utilities to take a financial beating, because they invested in coal in the face of global warming? What really amazed me was how many people were aware of and inspired by Boulder’s struggle to create a clean energy municipal electric utility. I also received reports about utilities that were shifting to clea...

The latest Colorado energy bill,  HB19-1313 , was apparently drafted for (and presumably by) Xcel Energy, though its language allows other utilities to choose to come under its provisions. Here is the bill’s fundamental requirement: “By 2030, the qualifying retail utility shall reduce the carbon dioxide emissions associated with electricity sales to the qualifying retail utility’s retail electricity customers by eighty percent from 2005 levels. For the years 2050 and thereafter, or sooner if practicable, the qualifying retail utility shall seek to achieve the goal of providing its retail customers with energy generated from one-hundred-percent clean energy resources so long as doing so is technically and economically feasible, in the public interest …” The bill only covers “retail sales” and does not include “sales for resale.” These constitute about a fifth of Xcel’s total sales. It only regulates CO2, but not other emissions, like methane. So the bill allows much more green...

I just reviewed the 2019 Legislature’s bills related to our critical need to reduce emissions of greenhouse gasses. I’m very pleased that finally we are really moving forward, thanks in large part to our elected representatives from the Boulder area. But the process is not complete, and some legislation is missing important pieces. Here are some brief comments on some of the bills: HB19-1261 — Climate Action Plan To Reduce Pollution This far-reaching bill requires an overall statewide reduction in 2025 greenhouse gas emissions by at least 26 percent from 2005 levels, 2030 greenhouse gas emissions by at least 50 percent, and 2050 greenhouse gas emissions by at least 90 percent. Additionally, it requires regulated investor-owned utilities (IOUs) to create “clean energy plans” to meet an 80 percent reduction target for their emissions by 2030, though the language is somewhat confusing re: actual performance. In exchange, these utilities apparently get relief from future carbon taxes...

Last week I testified at a Colorado legislative committee hearing regarding HB19-1037, the “securitization” bill. This arcane but important concept emerged as many states shifted from supplying electricity through regulated monopolies to competitive systems, where customers and communities have choices as to where they get their power. As a result, these monopolies lost their captive markets, so their uncompetitive power plants built under the old regulated system no longer had customers. But the utilities had relied on the regulatory structure to provide a guaranteed revenue stream, so the states had to cover the utilities’ losses to avoid “regulatory takings,” where utilities are involuntarily deprived of something they relied upon. Securitization was a way to reduce the cost of solving this problem: Bonds were sold that had backing from a governmental entity. The proceeds paid off the utilities for their remaining investment in these plants; the bonds were then paid off by the r...

Xcel is a for-profit monopoly that was created in 1998 to take advantage of outmoded, non-competitive, but highly profitable regulated utility systems in multiple states. Xcel wants Boulder to give up its chance for freedom in exchange for a new franchise that effectively locks Boulder to Xcel for 20 years, guarantees nothing of substance in return, and from which the escape terms are so expensive or painful that they could not ever be used. As Camera readers, I suspect you’ve already read about the flaws in Xcel’s proposal. But just to reiterate some important points: Practically everything would have to go through PUC review, and so could easily be stopped. The renewable energy programs offered are either already available or overpriced. And giving Boulder what it doesn’t offer to others would put Xcel at risk in all sorts of ways. Perhaps the biggest flaw is that Boulder could not really enforce the terms. It was clear going into discussions over a year ago that it would be a ...

“Those who cannot remember the past are condemned to repeat it.”  Originally electric utilities in the U.S. competed with each other by covering the streets with multiple sets of wires, but this competition lowered prices and cut profits. Then, roughly 100 years ago, these utilities realized that it would be a lot more profitable to not compete but rather to control their regulators. Thus was born the regulated private monopoly structure we now have. As new power plants got bigger, the unit price of electricity dropped, so customers could tolerate these excess profits. (Nonprofit public utilities also emerged as an alternative. Per the American Public Power Association, Colorado now has 31, and all 151 utilities in Nebraska are public.)  Recently, the for-profit private vertically integrated monopoly structure has begun to break up. Large sectors of the country(but not Colorado) now have competitive markets for electricity supply, independent system operators that match...

Five members of the Boulder City Council (Appelbaum, Brockett, Burton, Jones, and Shoemaker) are going on a trip to Portland, paid for by you and me, and accompanied by a number of locals, including many representing business/development interests. Why Portland? Maybe it’s because, as Patrick Quinton, the executive director of the Portland Development Commission, said in the Portland Mercury when discussing certain commercial areas, “It’s all gonna be about density. You’re going to see a sharp push to demolish things that are low-density.” The council members allegedly want to study how Portland, and Eugene which they are also visiting, deal with homelessness, affordable housing, transportation, and other policy concerns. The vast majority of the over two dozen additional attendees (over and above the multiple Boulder city government folks)are from Downtown Boulder Inc., the Chamber of Commerce, the Boulder Economic Council, the Boulder Convention and Visitors Bureau, the Colorado ...

Last week, I heard about a radical improvement to battery storage. These “flow batteries” are much cheaper than the current technology, with costs expected to drop by half or more. Commercial production is anticipated within a few years. Less expensive batteries will allow wind and solar energy to serve our demands much more cost-effectively, because they allow us to match this variable supply to our relatively inflexible demand by storing renewably generated energy when supply exceeds demand and then using it when demand exceeds supply. This would be in addition to our current ability to manage demand by, for example, cycling cooling loads at peak times, creating ice at night (using the excess wind energy that occurs then) to do cooling during the day, or running clothes dryers at off-peak hours. Not only do batteries allow a utility to flatten its demand curve, but they may allow the utility to avoid having to contract for committed backup power adequate for its peak load. When a...

Last week, after getting my workout biking up Lee Hill Road, I checked out the alternatives to Iris for biking between Broadway and Folsom. I rode east on Kalmia and Linden (north of Iris), and then west on Hawthorne and Grape (south of Iris). I saw only four moving vehicles, total, in the 2-plus miles of neighborhood streets. Thanks to council member Lisa Morzel for pointing out these routes and for bringing the “right-sizing” discussion back up. I’ve also ridden the multi-use path along 63rd Street multiple times. These alternate routes make “right-sizing” irrelevant for both Iris and 63rd as far as bike safety goes, so why were these alternates ignored? I believe that an important reason is because the focus was on an abstract concept — this grand scheme called “right-sizing” — rather than on the needs and issues of the specific situations. Other similarly overly-broad grand schemes include Housing Boulder, Design Excellence, the Civic Center redesign, Envision East Arapahoe...

There has been a lot of misinformation lately about Boulder’s attempt to municipalize its electric service. Here’s my bare-bones analysis: The wind deal: In 2011, Xcel made a last-minute offer to sell Boulder energy from a yet-to-be-built wind farm. Boulder would bear all the risks, but Xcel would set the numbers, so Boulder turned it down. Then Xcel had the farm built, and got a lower per Kwh price. So the CO2 savings occurred anyway. Buying the local grid: We are already paying Xcel for the local poles and wires, but when we’ve finally paid them off, Xcel will still own them. If we municipalize but bypass this equipment, we will still have to pay Xcel for their abandoned assets. So why not get something for our money? And even for homeowners and businesses that want to self-generate, the grid allows access to backup power, large-scale solar and energy storage, and cheap wind power from eastern Colorado. The courts: Unfortunately, our state legal system does not define a clear...

“The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and aesthetic values of the environment. Pennsylvania’s public natural resources are the common property of all of the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all these people.” So reads the 1971 amendment to Article I, Section 27, of the Pennsylvania state constitution. This amendment defines the balance of power between the state and local governments with regard to fracking. As John Dernbach, who runs a Pennsylvania environmental law center, put it, “The Pennsylvania Supreme Court ruled the state says how, and the local government has the right to say where.” (See Mark Jaffe’s article in last Sunday’s Denver Post and Monday’s Camera.) This balance is in marked contrast to Colorado, where the state government, supported by the courts, seems to appropriate local powers wh...