Colorado commission approves Xcel costs related to coal, wind retirements

The Public Service Co. of Colorado subsidiary of Xcel Energy (NYSE: XEL) was approved March 31 by the Colorado Public Utilities Commission for various rate matters, including retirement costs for the coal-fired Arapahoe power plant and an aging wind farm.

Public Service filed an Advice Letter in June 2014. The company proposed to increase its base rate revenues by $157.6 million and to revise its Transmission Cost Adjustment (TCA) to remove costs that would be shifted to base rates. In addition, Public Service sought approval of a rider for recovering the incremental costs of projects undertaken under its emission reduction plan under the Clean Air Clean Jobs Act (CACJA). Public Service requested approval of a revenue decoupling mechanism for its residential and small commercial rate classes. Public Service also sought approval of an incentive mechanism associated with the performance of certain generating units on the company’s system.

In June 2014, Public Service filed an application for approval of a Arapahoe Decommissioning and Dismantling Plan. Public Service requested final authorization to decommission and dismantle its Arapahoe Generating Station and to remediate and restore the plant site at an estimated cost of $34.8 million.

On Jan. 23, Public Service filed a settlement agreement with various parties to this case, which is what the commission approved on March 31. It directed Public Service to file, no later than April 1, 2016, an application for approval of depreciation and amortization rates for its plant and regulatory assets for retired facilities and to file in 2017 another electric base rate proceeding for rates to be in effect no earlier than Jan. 1, 2018.

With respect to the Arapahoe application, the settling parties stated that they accept Public Service’s proposed decommissioning plan and recommend that the commission authorize the company to proceed with decommissioning and begin incurring costs.

Also, the Ponnequin Wind Farm is a 25-MW facility built in phases between 1999 and 2001. According to Public Service, the facility will soon reach the end of its 15-year useful life. Public Service stated in this proceeding that the capital investments and ongoing operations and maintenance costs necessary to continue the operation of the facility are not justified. The company also stated that, due to the vintage of the turbines, spare parts are costly and difficult to source. Public Service therefore requested that the commission approve a year-end 2015 retirement of the wind farm. The settlement agreement stated that the settling parties accept Public Service’s proposed retirement of Ponnequin.

“We find good cause to grant the Arapahoe Application,” said the March 31 commission order. “Public Service’s plans for the decommissioning of the site are reasonable.”

It added: “Concerning Ponnequin, we approve the year-end 2015 retirement of the facility and find that no additional application for a [certificate of public convenience and necessity] is required.”

Said the Xcel website about Arapahoe: “Arapahoe Station began operating in 1950 when Unit 1 went into service. It was followed by Units 2 and 3 in 1951, and Unit 4 in 1955. Units 1 and 2 (45 megawatts each) were retired Jan. 1, 2003, as part of Xcel Energy’s voluntary Denver Metro Emissions Reduction Plan. … In spring of 2010, the Colorado Legislature passed the Clean Air-Clean Jobs Act, which Xcel Energy supported. The legislation requires regulated utilities, like Xcel Energy, to work to reduce emissions from coal-fired power plants. As a result, Arapahoe unit 3 will be shut down and unit 4 will switch to natural gas by 2013.” Those actions for the final two coal units did occur in 2013.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.