Expert laments 'perverse incentive' in energy program

Xcel Energy is manipulating Colorado’s renewable energy policies to reap profits from ratepayers above and beyond the allowed amount, according to a Public Utilities Commission renewable energy expert.

“It is now well known that [Xcel] has far exceeded its available budget for renewable resources and that the Company has been loaning money to the [Renewable Energy Standard Amendment] fund – and earning its rate of return on those funds – to allow it to acquire more renewable resources than it needs for RES compliance,” renewable energy expert Richard Mignogna testified last month.

He questioned whether the PUC should put the brakes on its demand for wind. Mignogna argues that Xcel uses the interest it collects from ratepayers for its solar commitments to invest in wind resources that it then sells to California in order to turn a tidy profit.

“The Company’s renewable energy acquisitions have already far exceeded its RES obligations. Exacerbating this problem and creating a perverse incentive is the fact that the Company is earning a profit on the sale of the excess Renewable Energy Credits which were paid for with interest by ratepayers. The Company is profiting on both ends of this deal and has exercised inadequate fiscal restraint,” he wrote March 16.

Xcel, aka Public Service Co., has exceeded its available budget under the Renewable Energy Standard Amendment fund, which he claimed is projected to end 2011 with a $97 million deficit.

“While PSCo typically argues that it is only charging customers the two percent allowed by the statute, that argument is disingenuous. As we now know, the Company has been loaning money to the RESA, earning its rate of return on the funds advanced, so that it can acquire more RECs than it needs only to sell them into California so that it can then claim a percentage of those proceeds,” Mignogna wrote.

Xcel spokeswoman Michelle Aguayo blamed the negative RESA balance on payments the company had been making to the Solar Rewards Program ― payments it recently reduced ― and she said the shortfall has “relatively nothing to do” with excess renewable wind credits it has sold to California.

The renewable energy wind credits Xcel is selling are not funded out of RESA, she said. They were acquisitions that the PUC previously ordered based on the 2005 All Source Request for Proposals.

“Selling RECs into CA is a win-win for both our customers and the Company,” Aguayo said. “We are under no obligation to seek out buyers of RECs but we believe it is a prudent thing to do. We negotiate a good price on behalf of our customers. Both of these actions produce margins that are shared back with our customers. Clean energy is good for Colorado. The legislature gave us limited funds that we could use to purchase renewable energy. By selling excess RECs we are stretching this very limited fund of money. This is not being disingenuous.”

Still, in light of the acquisition of more renewable resources than is actually mandated, Mignogna questioned “whether acquiring any resource in the 2011 Wind RFP is prudent. The company should not be permitted to advance funds, and earn interest on them, simply to acquire resources that it may then sell into other jurisdictions so that it may profit additionally from the sale,” he testified.

Xcel, meanwhile, is planning to double its wind resources by 2020.

River Name / Location	Stream flow, ft3/s	Gage height ft
Gore Creek
At Upper Station, Near I-70 Twin Bridges	n/a	4 ft
Booth Creek	n/a	4 ft
Abv Red Sandstone Creek At Vail	199	6 ft
At Mouth Near Minturn	225	7 ft
Beaver Creek
At Avon	21	2 ft
Lake Creek
Near Edwards	79	1 ft
Cross Creek
Near Minturn	98	4 ft
Homestake Creek
At Gold Park	127	5 ft
Eagle River
East Fork Eagle River Near Climax	n/a	2 ft
At Red Cliff	30	3 ft
Near Minturn	234	4 ft
Wastewater Treatment Plant At Avon	671	5 ft
Below Gypsum	826	5 ft
Colorado River
Near Kremmling	402	4 ft
Near Dotsero	1,620	3 ft
Below Glenwood Springs	3,080	5 ft
Near Cameo	3,740	6 ft
Below Grand Valley Div Nr Palisade	2,160	5 ft
Near Colorado-utah State Line	4,080	4 ft
Near Cisco, Ut	4,100	3 ft
At Lees Ferry, Az	12,100	9 ft
Near Grand Canyon, Az	12,000	9 ft
Yuma Main Canal Ww At Yuma, Az	997	10 ft
Roaring Fork River
Abv Lost Man Cr Near Aspen	n/a	n/a ft
Ab Difficult C Nr Aspen	53	1 ft
Near Aspen	77	1 ft
Near Emma	464	6 ft
At Glenwood Springs	1,150	3 ft
Hunter Creek
Near Aspen	57	2 ft
At Aspen	49	4 ft
Frying Pan River
Near Ruedi	111	2 ft
Crystal River
Abv Avalanche Crk, Near Redstone	610	2 ft
Arkansas River
Ef Arkansas R At Us Highway 24, Nr Leadville	46	3 ft
Near Leadville	85	5 ft
Below Empire Gulch Near Malta	156	3 ft
Below Granite	453	4 ft
Near Nathrop	451	4 ft
At Parkdale	469	3 ft