After more than a year of legal proceedings and negotiations, Colorado regulators have signed off on a plan by the state’s largest utility company to phase out its coal-fired power plants and replace them with cleaner energy sources.
The approval earlier this month by the Colorado Public Utilities Commission is a major milestone for Xcel Energy, which pledged to cut its carbon emissions by 85 percent from 2005 levels before the end of the decade. The company is expected to begin accepting proposals for cleaner energy projects in the coming months.
“It is … one of our most important and critical filings that we’ve made recently,” Robert Kenney, the new president of Xcel’s Colorado operations, said in an interview. “We’re very pleased with the approval of it.”
Xcel filed the first version of the electric resource plan in March 2021. The company made significant changes to the proposal following discussions with regulators, environmentalists, industry voices and elected officials. The utility commission approved the plan in a 186-page order pending appeals that will be filed by Tuesday.
The final plan covers a range of actions by Xcel Energy to stop burning coal by 2030. Fossil fuel is responsible for nearly 60 percent of planet-warming carbon dioxide emissions from the country’s energy sector, according to the U.S. Energy Information Administration.
The company will likely appeal sections of the commission’s order that outline the forthcoming bidding process for replacement electricity sources, Kenney said.
Until then, here is what the plan includes:
All coal-burning plans to close before 2031
Xcel Energy had initially proposed to phase out its coal-fired power plants by 2040, but pressure from regulators and environmental groups led the company to move the deadline up by a decade.
Under the approved agreement, Xcel will close coal-fired power stations in Hayden and Craig by 2028. The coal-fired Pawnee Generating Station in Fort Morgan would be reconfigured to produce electricity from natural gas before 2026.
During hearings on the plan, regulators and environmental groups put the highest scrutiny on the closing date of the company’s newest coal-fired generator at the Comanche Generating Station in Pueblo, one of the state’s largest single sources of climate-warming emissions. Under the agreement, use of the generator — which has been plagued by costly and unexpected breakdowns since it began operating in 2010 — would slowly phase out before its close by the end of 2030.
Up next: Proposals for clean energy — and natural gas — projects
The commission’s approval enables Xcel to take bids for new energy projects that would begin operating before 2029. The company plans to appeal portions of the bidding process outlined in the commission’s order, Kenney said.
The projects would generate electricity using wind and solar as well as natural gas, according to the agreement. The company would also have to prioritize any of its existing gas operations, according to the agreement.
Under the agreement, Xcel would also report on the feasibility of building a new hydropower plant in the Unaweep Canyon south of Grand Junction before the end of 2024.
Pueblo is protected until at least 2040
The Comanche Generating Station is a major source of tax revenue for the city and county of Pueblo, which received $31 million in property taxes from the company in 2020. That money helped fund libraries, schools and other public services.
With the plant closing decades earlier than initially anticipated, Xcel would pay property taxes through 2040, according to the agreement. Xcel could replenish those taxes by building new energy projects in Pueblo County, although the terms approved by regulators do not commit the company to do so.
The plant is also a significant source of harmful air pollution in Pueblo, whose residents do not receive electricity from Xcel Energy. The agreement commits the company to study the potential environmental effects future projects could have on the city and other areas burdened by pollution.
Regulators preview carrot and stick strategy for Xcel
In the agreement, the Public Utilities Commission signaled its intent to install financial rewards and penalties to keep Xcel on track to lower its emissions.
The strategy, known as “performance incentive mechanisms,” has also been challenged by the state’s utility consumer advocates and some researchers because it can disproportionately reward utilities for meeting easily attainable standards. In the agreement and order, commissioners wrote that an effective performance program should be “clearly and unambiguously focused” and “neither excessively punitive nor lucrative,” and said they’d consider a suite of emissions incentives in the future.
The deal is (almost) final
The commission’s approval allows Xcel to open up bids for energy projects. However, any of the more than two dozen parties involved in the proceeding could appeal the commission’s decisions by Tuesday. The commissioners would likely discuss those appeals in September, according to commission spokesperson Gail Conners.
Most of the opposition to Xcel’s agreement comes from the solar industry, which argues that certain elements of the deal are not inclusive or competitive enough for solar and storage projects.
