Democrats are continuing their vigorous march toward clean energy with a bill that cleared the House Energy and Environment Committee Monday, but it’s one that raises big concerns for the state’s largest investor-owned utility, Xcel Energy.
House Bill 1064 requires the Public Utilities Commission to set up two studies on “community choice energy” (CCE), a model used in several other states, including California, which refers to it as community choice aggregation (CCA).
It works like this: a community, or several communities, band together to contract with wholesale renewable energy providers, bypassing electricity purchased from investor-owned utilities, such as Xcel.
However, under a CCE contract, electricity would still be transmitted and delivered by the investor-owned utility, which would also manage customer service and billing and continue to operate its own power lines. Individual customers can opt out and continue to buy from the investor-owned utility under the models adopted in other states.
The benefit of CCEs, according to HB1064 sponsor Rep. Edie Hooton, D-Boulder, and other advocates, is that it will help those CCE communities move faster toward their clean energy and climate goals, and in some cases, cheaper energy rates.
But Xcel Energy executives told Colorado Politics that CCEs may result in higher energy costs for those who don’t get into the community energy business, and that CCEs may actually hinder its progress toward its renewable energy goals.
The bill comes out of last year’s 10-member interim committee on energy legislation, although it was not backed by the entire committee and hence is not a committee-sponsored bill.
HB 1064 was amended by the House Energy committee Monday with a strike-below that states that at least a dozen Colorado communities have committed to 100% renewable energy within the next 15 years. Two dozen have organized to advocate for climate change solutions, including five that also have committed to the 100% renewable goal. In total, Hooton noted, those communities represent more than one million Coloradans.
Hooton pointed out that CCEs would not be available to communities served by municipal-owned utilities, such as those run by Colorado Springs, Fort Collins or Longmont, and it also wouldn’t be available to communities that get their power from electric co-ops, such as Tri-State or the Intermountain Rural Electric Association.
Both sides of the issue point to California as either a state where it worked or a state that’s seeing unintended consequences.
One of those is market share. Hooton told Colorado Politics that she knows CCEs would be disruptive to the investor-owned utilities and to their shareholders. But while she said she regrets that, “I’m not here to protect the interest of shareholders or executives’ salaries.”
In California, Pacific Gas & Electric announced in 2016 it would shut down its Diablo Canyon nuclear power plant, and cited loss of customer base due to community choice aggregation as one of the reasons. In 2010, investor-owned utilities in California had 78% of the market share, but it’s expected to drop to 57% by 2020.
Xcel executives told Colorado Politics that their concerns are centered around reliability and volatility.
Within the world of utilities, resources (energy input) must match load (energy output). Xcel has two substantial planning strategies: one that deals with minute by minute or even second by second monitoring of the system to ensure that when someone turns on a light, the light comes on. That’s the reliability side of the system. The second is long-term planning, for 30 years or more into the future, and the resources Xcel will have to meet customer demand. That’s where renewables come in. Xcel has committed to carbon-free electricity by 2050, the first major utility nationwide to do so.
Xcel’s ability to add renewables to their energy portfolio is dependent on the reliability of the resources, such as solar, wind or even hydropower, according to Jonathan Adelman, Xcel vice president for strategic resource and business planning. Community choice energy adds a new variable to the system “with little oversight or understanding on how it will work,” according to Adelman.
More affluent communities will be able to afford CCE systems, he explained. But it will push costs onto those who aren’t in CCE communities, and that could result in unfair costs as well as concerns about reliability. “Our concern is that if you do this wrong, if you undermine cost or reliability, it could slow the transition to renewables, rather than pushing it faster,” Adelman said.
A 2019 study by the Golden-based National Renewable Energy Lab estimated that as of 2017, 750 CCAs have been set up in seven states, serving about five million customers. Two more states have set up CCAs since 2017.
The study raised several key challenges to CCAs, such as maintaining cost savings, critical to keeping customers; customer awareness and policies around suspension. At least a half-dozen cities in California have suspended CCAs due to market conditions, including resource reliability.
On the pro side, the NREL report said that while CCA customers may be willing to pay more for voluntary green power, CCAs have been able to offer renewables at a lower price. The study showed CCAs are at a minimum competitive with basic electric service.
Hooton maintains she is not trying to get rid of investor-owned utilities. She told the energy committee last month that the focus is on long-term community values. “It’s the community buying the power on behalf of its residents,” she said.
She also points out that the bill is asking for two studies, both due by June 30, 2021. Under the amended bill, one study would be overseen by the Public Utilities Commission. That study would be conducted by an independent third party and would assess financial feasibility and risk, including an estimate of what’s called exit fees. That’s what CCEs would pay to Xcel or other investor-owned utilities to compensate them for their share of costs tied to utility assets and contracts. The study also would look at how many cities would participate in CCEs, and whether they would be cost-competitive.
CCEs will give communities an option to municipalization, as is being considered by Boulder, which Hooton said has already spent $23 million to fight Xcel over Boulder’s desire to own its own utility.
The second study, also under the PUC, is an “investigatory docket” that would allow stakeholders, energy experts and regulators from other states to testify on CCEs before the PUC. That includes a list of 18 questions, related to the regulatory and legal aspects of CCEs, financing and credit, pros and cons from those who have adopted CCEs, impact on low-income customers, and whether CCEs would allow Colorado to reach its clean energy and greenhouse gas reduction goals.
HB 1064 is now awaiting action from the House Appropriations Committee. The study costs from the bill as introduced estimates it at $778,637.