There was not a single state in the country whose coal costs increased less than 5% a year from 2004-2009. Colorado coal costs went up over 10% a year for that period.
Despite all of the evidence of 10%/year coal cost increases in Colorado, Xcel typically models coal costs increasing less than 2% a year. The most recent analysis by Xcel in docket 10A-377E shows coal costs increasing at about 0.1% per year from 2012-2037 (or 1/100 of the actual rate of increase from 2004-2009.)
Underestimating coal costs is used to justify large investments in coal plants. Most recenly Xcel has asked for approval to spend $380 million on pollution control for the Pawnee and Hayden coal plants – neither of which has a long term coal supply and Xcel’s analysis was done assuming coal prices stay close to flat for the next 30 years.
(Xcel is also using low fossil fuel costs to justify smaller investments in renewable energy–the only generating technologies that can begin to stabilize rates.)
Rate payers pay 100% of actual fuel costs uncer the Electric Commodity Adjustment (“ECA”) clause on their Xcel bills. In short, Xcel gets to make the decisions about whether to invest in coal plants, but they don’t pay any of the fuel costs.
So far, the PUC has accepted Xcel’s coal cost modeling.
For more information:
See the recent attached report from Headwaters Economics on Fossil Fuel Extraction and Western Economies:
Headwaters Fossil Fuels in the West (Coal prices page 15 (page 28 on the counter) –See steady long term increases in cost with costs almost doubling over last decade)