***Update – The hearing was vacated and rescheduled for April 21***
On Friday, April 4 and continuing Monday, April 7, there will be a hearing on docket 13AL-0958E at the Colorado Public Utilities Commission. Why is this docket important? It has the ability to further decrease the rates that Xcel pays for power generated by outside power producers and thereby keep the generation of power in Xcel’s Colorado territory under its control.
As background, a Federal law, the Public Utilities Regulatory Policies Act (PURPA), passed in 1978, requires utility companies to buy power from outside producers if the cost is less than what it would cost them to make the power themselves, known as the “avoided cost.” This theoretically allows for small power companies, such as solar, wind, and hydro, to get into the power market. One of the main rubs in this system is determining what the “avoided cost” is, and therefore, what rate the independent power producers get paid for their power. That’s the subject of this docket. Xcel filed paperwork with the PUC that will change the rates they pay for this outside power for systems sized from 10-100 MW as well as the methodology by which they determine what that power is worth going forward.
In the experience of one of the parties, the methodology and rates that are finalized in this docket become the de facto rates and methodology for other power that Xcel buys overall. Avoided cost has been defined to include any number of factors, but Xcel typically keeps avoided cost artificially low, making it hard for independent power producers to get a sufficient return on their investment to make the development feasible. Federal law requires that the rate paid to these outside producers or qualifying facilities (QF), be among other things, not in excess of the incremental cost ( (the cost of producing an additional unit of generation) to the electric utility. There are interesting developments in other states, California being one of them, to include environmental costs in this avoided cost determination. Environmental costs are chief among the factors that need to be considered in these determinations, but Xcel will argue that they don’t directly pay the environmental costs that are being assigned in an avoided cost determination and so that cost cannot be fairly considered. Yet another reason we need to change the entire system, but I’ll try to stay to the docket at hand.
There are only two parties, in addition to Xcel, in this docket. Vote Solar, a solar advocacy group, argues that the rate Xcel has proposed is far too low. Rick Gilliam, on behalf of Vote Solar, addressed the Company’s proposed avoided costs and methodologies used to derive the QF rate for small PV systems, and the resultant proposed changes to the Small Power Production and Cogeneration Facility Policy. In particular, Mr. Gilliam pointed out that the subject of the docket at hand is the ability of customers to connect as a QF and sell excess power at the avoided cost rate calculation. Specific problems with the calculations are that the historic test year for the valuation of avoided costs relied on a sample size that was too small and undervalued the contributions of solar to the grid, and didn’t take into account other avoided costs like transmission and distribution. His testimony on p. 6 points out the difference per megawatt hour in calculation of the benefit of renewables in the RES compliance plan ($82.20/MWh), the QF docket ($32.73/MWh) and a solar party (The Alliance for Solar Choice) estimate ($166.90/MWh). Vote Solar argues other factors that should have been included in the avoided cost determination include avoided generating capacity, avoided capacity cost, avoided transmission costs, avoided distribution costs, and environmental costs. With these considerations, Vote Solar initially recommended a rate of $145.50/MWh for fixed PV systems and $132.00/MWh for tracking.
The only other party that is directly involved in fighting Xcel’s rates and methodology in this matter is Western Colorado Power Company. They provide hydropower to Xcel under long term contracts. While not directly impacting their business, the company argues that the rates and methodology adopted in this docket will be improperly imputed to all contracts that are negotiated for outside power with Xcel. Western Colorado Power Company states that there are hidden costs which are unaccounted for in the Xcel development of avoided costs serving to artificially depress the rates paid to these outside power producers. (Testimony of Eric R. Jacobson, p. 8) The company argues that the additional costs not included in Xcel’s avoided cost determination include personnel, labor or salary costs paid by PSCo to its employees; pension costs; vehicles and special equipment; interconnection costs; legal costs; healthcare costs; costs of facility licensing with the Federal Energy Regulatory Commission; independent contractor and independent consultant costs; insurance costs; and decommissioning costs.
The hearing is on Friday and Monday, April 4 and 7 after which point, hopefully, some of these issues will be hammered out.