How consumers and taxpayers subsidize Colorado’s monopoly power provider
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There is one thing that climate change is responsible for in Colorado: the stranglehold Xcel Energy, the state’s largest monopoly utility, has on Colorado ratepayers. Eco-left lawmakers and two governors have been so consumed with an irrational fear of fossil fuels that they have put Xcel’s profits ahead of low-income ratepayers and consumer choice.

Xcel is Colorado’s largest electricity provider, serving roughly 1.4 million ratepayers. While it is not the sole source of power in Colorado, whatever the behemoth does impacts the other investor-owned utility, Black Hills Energy, and often trickles down to our rural electric cooperatives too.

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Xcel has done a lot. Partnering with one-term Colorado Governor Bill Ritter, his successor John Hickenlooper, and the mostly Democrat-controlled legislature, they’ve passed and re-authorized a spate of nearly 60 pieces of legislation collectively known as the “New Energy Economy.” The legislation includes an array of environmental favorites that includes tripling the state’s “renewable” (meaning mostly wind) mandate, fuel switching, a carbon tax, and demand-side management (DSM) programs designed to address Colorado’s impact on climate change.

 

As a result, over the last decade plus, Colorado’s electricity rates have skyrocketed by more than 62 percent across all sectors—nearly 1.5 times the rate of inflation and 2.5 times the growth of median household income. As rates soar, so do Xcel’s profits. Last year alone, Xcel’s net income rose 14 percent, along with the company’s earnings per share. CEO Ben Fowke made roughly $11 million – not for ratepayer satisfaction but for Xcel’s increased profitability.

In a competitive market, I’d be congratulating Fowke and his team. But Colorado ratepayers don’t enjoy a free market in electricity. They have no choice and virtually no voice as state agencies charged with being watchdogs instead serve as lapdogs for Xcel and the environmental left. 

In 2013, the Independence Institute conducted a study and found that four of the largest cost-driving pieces of legislation enabling Colorado’s New Energy Economy cost Xcel ratepayers nearly half a billion dollars in just one year. 

Despite assurances of a two percent rate cap, “free” energy sources, and cost savings, the renewable mandate and DSM legislation alone took $343 million and $77 million respectively out of ratepayers’ pockets. The total cost for all four bills was $345 per ratepayer per year.

Adding insult to economic injury, with virtually no growth in retail electric sales and an excess of electricity generation capacity, the governor-appointed Colorado Public Utilities Commission recently approved Xcel’s massive Rush Creek industrial wind project that will cost ratepayers another $1.1 billion. 

Because of the federal production tax credit and a nearly 10 percent rate of return on building new capacity, Xcel continues to build wind, pays other wholesaler generators to take their excess wind electricity, and still profits at ratepayer and taxpayer expense.

The eco-left cheers industrial wind because it’s not a direct burning of hydrocarbons, the root of all evil.  Never mind all the fossil fuels needed for mining, manufacturing, transportation, and transmission needs of wind energy.  They can’t help but chalk up a victory for climate change against nasty fossil fuels and affordable, reliable, abundant power. And never mind the cost.

The eco-left, whether at the legislature or at the PUC, has abandoned any pretense of caring about low-income ratepayers. Re-authorizing the 2007 DSM program, which is being sold as a way to save ratepayers money and reduce the need for Xcel to build additional capacity, is making its way through the Colorado state legislature.

In a recent docket, the PUC was a little more honest about DSM’s purpose, writing, “Because Public Service currently has surplus generation capacity, the primary purpose of DSM in the early years of the 2015 through 2020 planning period is to reduce fossil fuel use and help ratepayers lower their energy bills.”

Instead of trying to “help” lower ratepayers’ bills, the legislature and the PUC could actually reduce rates by stopping Xcel’s profiting from the social engineering of electricity use.

There was a time not so long ago when Xcel’s shareholders had skin in the game. In the company’s 1999 Integrated Resource Plan, it tried to distribute the cost of wind to all ratepayers but withdrew the idea when the Office of Consumer Counsel objected. Instead the 35 megawatts of wind Xcel wanted to “acquire” was at “shareholder risk,” not ratepayer expense.

Not anymore. Now ratepayers shoulder the costs and risks, and shareholders enjoy the benefits. Apparently the legislature feels a need to atone for its economic sins against ratepayers by funneling additional taxpayer money to help low-income Coloradans offset their high electric bills while Xcel profits.

There is only so much gouging that ratepayers will take. Xcel need only look at Nevada where 72 percent of voters approved a 2016 ballot initiative to allow electricity provider choice, a measure aimed at the state’s monopoly utility.

Remember the saying: Pigs get fat; hogs get slaughtered. Xcel is a hog. The question is when will it be slaughtered? 

Amy Cooke is executive vice president, and directs the Energy Policy Center, at the Independence Institute (@I2idotorg), a free market think tank in Denver.


The views expressed by contributors are their own and are not the views of The Hill.