What's the PUC Up To?

Let's check in on our good friends Chairman Blank and team

For me, these numbers are mind-boggling
— Chairman Blank

25 July CIM

From the Commissioner Information Meetings, the 25 July 2024 section, we have the 30 Year Rate Model. This is an incredibly complex spreadsheet so let me provide just the summation of the model.¹

Yes, it has rates increasing at ~ twice the rate of inflation. And this was modeled before Trump’s self-destructive tariffs were implemented. As a lot of the equipment comes from overseas, much of it from China, we could be looking at three times or more of inflation. With inflation bounding up.

15 January CWM

I’ve gotta say, I’m in agreement with Chairman Blank. If you go to the 15 January Weekly Meeting, about 15 minutes from the end, there’s a fascinating statement by Chairman Blank.

When I got on this Commission four years ago, Public Service Company’s total electric rate base was roughly $8 billion. In this case, the company is proposing to spend over $7.5 billion by 2029, perhaps the single largest increase to rate base in my tenure. In its ERP filing, the company has informed us that they’re planning to spend a cumulative total of $43 billion on distribution over the next 20 years, as well as another $38 billion on transmission. For me, these numbers are mind-boggling and deserve careful, thorough, and thoughtful questioning and scrutiny.

…

In Mr. Ihle’s testimony, he shows household peak consumption more than tripling from 5 kW to 16 kW. This seems like a stunning shift in customer usage.²

…

They’ve got 70% of their load growth coming from data centers

So $81 billion just for transmission & distribution lines plus God knows how much for additional generation capacity. That capacity growing 20% - 30%/year,³ lead in large part by data centers.

30 April CWM

Now we go to the 30 April meeting about 25 minutes from the end. This is from the PUC staff.

Residential rate forecasts indicate the base case rises 20% by 2027, aligning with 2.5% inflation by 2038. Low and lower low scenarios yield higher rates due to lower sales spreading costs over fewer customers. REI’s calculated scenario, combining base case spending with lower low sales, projects rates doubling inflation by 2044 if sales don’t materialize.

To maintain rates at 2.5% inflation, capital spending reductions are needed: 11% for the base case, 31% for low, 47% for lower low, and 63% for the calculated case. Comparing to California, PG&E’s rate base grew 8% annually (2010-2023), while PESCO’s is forecast at 16% (2020-2032). PG&E’s negative sales growth, likely from rooftop solar, drove rate increases, underscoring the need for careful capital and sales management in Colorado.

Or to put it another way, if Xcel does not build to exactly match demand, rate payers take it in the shorts.

Xcel's Just Transition Proceeding

Go here to read a detailed dive into Xcel's Just Transition Solicitation (by yours truly)

Conclusion

The PUC is diving into this, which is good. The Commissioners and Xcel do not appear to be on the same page, which is bad. We’re running out of time to address this and they’re still dancing around each other rather than focusing on predicting the future.

We want electricity to be inexpensive, reliable, and carbon free. Pick two.⁴ Until the PUC understands this, they’re going to be unable to make a decision.

A couple of observations:

• If we overbuild, all of us rate payers will be overpaying for more electricity than we need.

  • Xcel is good with this because they get their guaranteed profit on top of the overbuilt CAPEX.

• If we under-build the best case is reduced economic growth and fewer jobs. The worse case is that plus rolling blackouts.

• Xcel is showing what is likely the best path to zero/no carbon with wind & solar. The PUC is freaking out at the price. There’s no way to square that circle.⁵

• Instead of offering data centers tax breaks, tell them they need to commit, in advance, to buy their power for 20 years. Shut down the facility, still pay.

  • Giving data centers a tax break for a supposed future payoff is a sucker bet.

• Permitting for transmission lines can take up to 7 years. If so, we’re fucked.

• Where are we going to get all this power? If Wind & Solar, that also means building backup gas to match. If nuclear, we need to start construction yesterday.

  • Either means, we’ll likely be keeping the coal plants running longer than planned.

• Maybe we should hold off on encouraging heat pumps and EVs until we catch up with generation?

Governor Polis is asking the PUC to achieve certain goals. The Colorado Legislature has mandated their goals. That doesn’t mean they are achievable. And if they’re only achievable at extreme cost to the rate payer, the responsible response is to advise the legislature of the cost.⁶

And… the PUC needs to develop a sense of urgency.

1. Full meeting video here.

2. This is reasonable if households go to electric for heat and vehicles. Otherwise, huh?

3. Electricity Demand is Going to Skyrocket

4. In software development it’s a truism that people want a project delivered quickly, with all features, for cheap - pick two.

5. We can accomplish it with nuclear - if we can tame the permitting beast.

6. The PUC can tell the Governor no. But it must follow the dictates of legislation if physically possible.