The Real Cost of Being Green
Gov. Bill Ritter and green energy advocates are selling Colorado a false bill of goods when it comes to the "New Energy Economy." They claim the green energy agenda won't burden consumers, but their interpretation relies on misleading accounting that hides billions of dollars in green energy costs.
The crown jewel of Ritter's much-ballyhooed plan is the renewable electricity standard (RES), which requires investor-owned utilities to generate at least 30 percent of their electricity sales from renewable energy sources by 2020.
Critics warned that a 30 percent RES will saddle energy consumers with higher costs, and the facts seem to be on their side. According to the federal Energy Information Administration's projection of future electricity costs, in 2016 wind power will be nearly 50 percent more expensive than coal and nearly 80 percent more expensive than natural gas. Thermal solar generation is projected to be 150 percent more expensive than coal, and 200 percent more expensive than gas.
Green energy enthusiasts, however, argued that the RES law ensures costs stay low by limiting the retail rate impact to 2 percent annually. Gov. Ritter bragged that the RES "will not increase cost to consumers." Rep. Max Tyler, the lead sponsor of the RES in the legislature, claimed cost concerns were "absolutely wrong," because "there's a 2 percent cap."
Listening to Tyler or Ritter, one might conclude this legally mandated price control applies to the entire RES program, but that would be wrong. In fact, the cap pertains only to incremental costs, the difference in projected operating costs between conventional energy and the new renewable energy used to meet the RES.
Incremental costs are only a small portion of the total cost. The Public Utility Commission's William Dalton said the 2 percent rate cap "could be a point of confusion to ratepayers . . . . The costs above the rate impact are recovered through other commission-approved cost-recovery mechanisms." The 2 percent rate cap does not apply to these mechanisms.
In 2009, 2 percent of Xcel Energy's sales amounted to $44 million. But that's only a fraction of what Xcel charges customers for green energy. According to its balance sheet, Xcel spent $72 million meeting the RES, or almost $30 million more than the rate cap. And this figure doesn't count $147 million to pay for new wind-energy resources used for RES compliance. All told, consumers paid almost $220 million to meet the RES in 2009. Clearly, the rate cap is a sham.
Unfortunately for Xcel customers, these RES costs are only the tip of the iceberg. According to the energy company's own projections, unofficial RES costs will balloon to more than $700 million by 2020 — or almost 23 percent of projected electricity sales.
Over the next decade, Xcel customers are on the hook for almost $3.8 billion in renewable energy costs that don't fall under the rate cap. With the company's current number of 1.36 million ratepayers, that averages to nearly $2,800 per customer just to comply with the RES.
The real injustice is that these costs are unnecessary. As part of its most recent electric resource plan, Xcel proposed shuttering 229 megawatts of coal power by 2014, in order to comply with Ritter's executive order to achieve a 20 percent reduction in greenhouse gas emissions by 2020. Xcel is retiring reliable, cheap power and adding intermittent, expensive green energy to comply with the green agenda.
Up until 2007, Xcel was obligated to provide electricity at "least cost." Now, however, the Public Utilities Commission says that climate change — rather than affordability — is the "main driving force" behind resource planning. Xcel customers are poorer as a result, no matter how the politicians spin the costs of green energy.