***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.