Hickenlooper signs controversial renewable energy mandate for rural co-ops
June 12, 2013
After nearly a month of deliberating, Gov. Hickenlooper signed a controversial rural renewable energy bill into law on Wednesday.
The decision came to the chagrin of many local utilities providers.
The law requires rural energy co-ops to source 20 percent of their electricity from renewable technologies by 2020. Previously, the mandate had been 10 percent.
Officials at Mountain Parks Electric said consumers should brace themselves for rate increases as early as January 2014. The energy provider buys electricity from Tri-State Generation and Transmission Association, a wholesale supplier to 26 electric co-ops in four states.
“I think in a year or two, everyone’s going to forget it passed. Rates aren’t going to go through the roof, they might go down or just stay the same. The sky’s not going to fall.”
— Liz McIntyre, renewable energy advocate
"Our board and management will be analyzing all aspects of the law over the coming months to determine the best course of action going forward," said Tri-State communications manager Jim Van Someren.
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Tri-States' preliminary calculations indicate the legislation could cost up to $2 billion over the next 20 years. The company points to construction of transmission lines and new power plants as the primary expense.
The bill, which was introduced in the state senate as SB 252, stirred significant controversy during the last legislative session. Rural co-ops say their input was left out of the drafting process in favor of environmental group interests.
"We didn't find out about it until it was introduced and in the process of being passed," said Joe Pandy, general manager at Mountain Parks Electric. "The legislation was made in secret and put through by Front Range legislators without any regard to cost impacts on rural people."
But environmental groups believe the law's benefits outweigh its costs.
Western Resource Advocates and Conservation Colorado called Tri-State's projected costs bunk, pointing to plans to build four large transmissions lines that are already in the works. According to Western Resource Advocates, these lines could accommodate renewables.
Environmental groups also say costs to consumers will be minimal, pointing to the law's 2 percent cap on rate hikes per year that utilities can charge to cover costs associated with renewable projects.
"It's complex, but technology is changing. Renewables are becoming more affordable," said Liz McIntyre, a local environmental and renewable energy advocate.
As evidence, McIntyre points in part to a Denver Post article from late last month, in which Xcel Energy's purchase cost fell from a 2007 average purchase cost of $42.16 a megawatt-hour to $27.50 a megawatt-hour – a price drop of nearly 35 percent.
By 2016, nearly 30 percent of Xcel's energy will come from wind, a decision driven by price and not mandates.
For Tri-State, 60 percent of generated electricity comes from coal-fired power plants, and it purchases another 21 percent of its power. While renewables currently account for 15 percent of electric generation, Van Someren said that renewable figure includes 12 percent generated from hydropower dams last year.
The new law does not count hydroelectric generation from old, large dam projects due to ecological concerns. This leaves Tri-State's current renewable portfolio – with energy generated from wind, biomass and smaller hydropower sites – at a meager 3 percent.
When it comes to cheap electricity, coal remains king. But coal prices are rising, while the cost of natural gas and renewables like wind energy drops.
According to Xcel's annual reports on fuel supply and cost, the cost of coal increased from $1.58 in 2010 to $1.77 in 2012. Even adjusted for inflation, this amounts to an increase of more than 6 percent. Conversely, the cost of natural gas fell from $5.05 to $4.25 in the same period.
Prices can fluctuate for a number of reasons – like an increase in demand for coal overseas or an abundance of natural gas locally from hydraulic fracturing. But beyond dollars, the environmental costs of coal-based electricity remain considerable. According to the Environmental Protection Agency, fossil fuel-powered electric plants account for 67 percent of the nation's sulfur dioxide emissions and 40 percent of the nation's carbon dioxide emissions. The emissions cause smog, acid rain and fuel climate change.
In the short term, rural customers' wallets will still feel a blow. Mountain Parks Electric has done its best to absorb energy hikes in the past – for example, when Tri-State's wholesale rate went up by 4.9 percent in 2013, Mountain Parks Electric raised local rates by only 4 percent. But the co-op can only absorb so much.
"We're a not-for profit co-op, we have no interest in charging any more than we absolutely have to," Pandy said. "But there's no good forecast for what will happen in the future."
Still, the law's rate hike cap and dropping prices for renewables make Grand County residents like McIntyre optimistic.
"I think in a year or two, everyone's going to forget it passed," she said. "Their rates aren't going to go through the roof, they might go down or just stay the same. The sky's not going to fall."