A relatively small Xcel Energy natural gas project to serve homes in the Sloan Lake area set off a major debate at the Colorado Public Utilities Commission over the state’s energy future and its goal to reduce greenhouse gas emissions.
Environmentalists, consumer advocates and commission staff opposed the $32 million plan, arguing it was “at odds” with Denver and state policies to reduce greenhouse gas emissions and move to cleaner energy.
Xcel Energy’s Colorado subsidiary, Public Service Company of Colorado, and suburban officials said, in filings, the upgrades to the natural gas delivery system were necessary to ensure reliability and accommodate growth.
The commission on Wednesday approved the West Metro Gas Project, but not without some frustration and soul-searching.
“We find ourselves walking a tightrope moving full speed ahead on an energy transition,” Commissioner Megan Gilman said, at an earlier hearing on the project. “Transitioning this energy system that people depend on every day is tough.”
The project will serve a projected 6,800 customers in the Sloan Lake area of Denver, Edgewater and Lakewood, by adding a new regulator station and 18,000 feet of new pipes.
“The current gas infrastructure is simply not sufficient to serve customers now — and especially will not be able to sustain growth of an area with many affordable housing development opportunities,” Lakewood Mayor Adam Paul said in a filing.
Opponents, however, argued that Xcel Energy did not adequately look at alternatives, such as injecting compressed natural gas into the system when demand was high or using demand-side management programs to help customers limit peak demand.
The Colorado Office of the Utility Consumer Advocate, the commission staff and the nonprofit Southwest Energy Efficiency Project, known as SWEEP, sought to block the project.
“The company didn’t come forward with enough time to look at alternatives,” Justin Brant, SWEEP’s utility program director, said in an interview. “We have to take a long-term look at these projects, because these are long-term assets.”
The risk is that the useful life of the investment is cut short — just as coal-fired power plants are being retired early — leaving a “stranded asset” for which someone must pay, Brant said.
“The company bears some responsibility for these choices,” Gilman said. “It seems unfair that the entirety of the uncertainty should be on the back of ratepayers with guaranteed recovery.”
The project is also counter to Denver’s plans to reduce natural gas consumption, the state law aimed at reducing greenhouse gas emissions 50% from 2005 levels by 2030, and Senate Bill 264, requiring natural gas utilities to cut emissions, Gene Camp, PUC deputy director, said in testimony.
“The impact of ongoing business-as-usual investments in Public Service’s gas system will live on deep into the future in monetary and emissions contexts. This pattern cannot continue,” Camp said.
Natural gas utilities are required to submit “Clean Heat Plans” next year showing how they will achieve a 4% reduction in emissions from 2015 levels by 2025, and a 22% reduction in 2030.
“We have our clean heat plans coming in future years and that’s where the rubber will meet the road,” Commissioner John Gavan said.
The commission is also updating its natural gas planning rules, but in this case Xcel Energy had proved the need for the project, Gavan said.
“If we were two years down the road it might be a different decision point, but where we are today we are faced with the obligation to serve,” he said.
Brooke Trammell, an Xcel Energy executive, said in testimony that the company can move forward with the West Metro project and at the same time its local distribution company, or LDC, can meet its obligation under Senate Bill 264.
“A reasonable path forward lies with a portfolio of emissions reduction strategies including dual fuel heating systems, supply-side options and other measures,” Trammell said. “These measures will ensure that emissions of our LDC system will be reduced over time to meet the goals.”
Still, the commissioners said they were concerned by the lack of alternatives and the cost of the project.
“I’d like to see stronger alternatives than what we saw in this case,” Commission Chairman Eric Blank said, adding that the commission should issue a finding “expressing our disappointment and putting the company on notice.”
The balance of the costs compared to the number of customers served was another point of contention for the commission.
“Is growth paying its way?” Gilman said. “This is kind of a prime example of looking at a project for a pretty limited number of customers, which is not going to be supported by any projections to increase revenue.”
Blank estimated that at $32 million the project was equal to a $4,500 to $5,000 subsidy for each Sloan Lake customer, paid by the rest of Xcel Energy’s customers.
“It seems like the company has a single solution to every safety and reliability problem, which is to spend money and stick it in the rate base, socializing the cost,” Blank said.