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Closing a coal-fired power plant in Pueblo to meet Colorado climate goals is easier said than done

The fate of Xcel Energy’s Comanche 3 plant is tangled at the crossroads of emissions and economics

The Comanche Generating Station in Pueblo is seen on Oct. 21, 2021. Pueblo County commissioners are studying the feasibility of small modular nuclear technology to replace the beleaguered power plant. (Mike Sweeney, Special to The Colorado Sun)
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This much is certain: Comanche 3 ­— Xcel Energy’s $1.3 billion coal-fired power plant in Pueblo — is going to close. When and how are now issues of intense debate before the Colorado Public Utilities Commission.

The fate of the plant — the state’s largest single emitter of carbon dioxide — is key to Colorado meeting its greenhouse gas reduction targets, and for Xcel to fulfill its statutory requirement to cut its emissions 80% over 2005 levels by 2030.

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Xcel wants to keep the plant running, albeit at a reduced level, until the end of 2039, a position seconded by labor and Pueblo city and county officials. Consumer advocates and environmentalists are pushing for changes as early as 2025 and total closure as soon as 2027.

When it was built Xcel expected to run the unit until 2070.

Comanche 3, however, is not only Xcel’s largest plant but also its most controversial, generating cost overruns, chronic breakdowns and lawsuits.

All this complicates the when and how of Comanche 3’s final day. It is not just a question of cutting emissions, but also ensuring reliability, addressing employee and Pueblo community concerns, determining how to pay for the closure and avoiding a sharp jump in customers’ bills.

“It’s a question of what is feasible politically, economically,” said Cindy Schonhaut, executive director of the state Office of Utility Consumer Advocate, which represents residential and small commercial customers. “What are the community interests? What are state mandates? What is the cost to consumers?”

The answer to the closing of Comanche 3 has to address all those issues, Schonhaut said.

The proposed fate of the power plant, a state-of-the-art coal-fired unit that went online in 2010, is laid out in the electric resource plan, or ERP, and clean energy plan submitted to the PUC by Xcel’s Colorado subsidiary, Public Service Company of Colorado.

Utilities regulated by the PUC must submit an ERP every four years with projections of electricity demand and the resources they will use to meet it. They were required in 2019, under Senate Bill 236, to add a clean energy plan to reduce utility sector carbon dioxide emissions.

That same year, the state adopted a law setting greenhouse gas reduction targets over 2005 levels of 26% by 2025, 50% by 2030 and 90% by 2050.

Xcel’s $8 billion ERP calls for closing coal-fired plants, cutting carbon emissions 85% by 2030, and adding 5,300 megawatts of new capacity, primarily wind, solar and battery storage.

“This ERP is critical to meeting the state’s economy-wide carbon goals and meeting the sector’s goals,” said Keith Hay, director of utility policy at the Colorado Energy Office.

Some generation will be backfilled with wind and solar

As part of its clean energy plan, Xcel is already set to mothball 1,200 MW of coal-fired capacity at three power plants it operates or shares in, including Comanche units 1 and 2.

Some of that loss will be filled by plans to add 2,300 MW of wind farms, 1,600 MW of large-scale solar projects and 400 MW of battery storage, but the utility still needs “dispatchable” generation, which can be turned on when the sun isn’t shining or the wind isn’t blowing.

Xcel is proposing to fill the gap with 1,300 MW of dispatchable resources, such as new natural gas-fired plants, and using Comanche 3 and its Pawnee plant near Fort Morgan, which would be converted to natural gas from coal.

Xcel Energy’s Pawnee Generating Station near Fort Morgan is scheduled to be converted to burn natural gas rather than coal. The state consumer advocate would prefer that it remain burning coal and used only when necessary. This would save $44 million in retrofit charges Xcel would pass on to consumers. (Andy Colwell, Special to The Colorado Sun)

Keeping the two plants running would enable Xcel to avoid having to build about 900 MW of new natural gas plants, according to the company. Under the plan Comanche 3 would run at about a third of its capacity annually from 2030 to 2040.

“This allows for lower emissions while providing cost-effective reliable operations for the Colorado system,” Alice Jackson, CEO of Xcel’s Colorado subsidiary, said in PUC testimony.

How Xcel will efficiently run a plant at 33% when it’s designed to operate at 80% capacity isn’t laid out. “It is not entirely clear to any of us,” said Gwen Farnsworth, a senior policy adviser with the environmental group Western Resource Advocates. “But Xcel has been a leader in operating their coal plants with more flexibility.”

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The parties intervening in the ERP case offer variations on a theme. Western Resource Advocates is recommending to the PUC that Comanche 3 be switched to limited use, either seasonally or based on economics, starting in 2025 and closed by 2030.

The state energy office has a similar recommendation, but adds that if the PUC does approve the 2040 closure it should place additional restrictions on the plant to limit its emissions.

“We want early and deeper emission reductions, if possible,” Hay said.

The state consumer advocate is recommending that Pawnee be kept as a coal-fired plant (saving $44 million for the natural gas retrofit) and along with Comanche 3 be kept in service until 2040, but only used on “economic dispatch,” which is to say when it is economical.

The idea is that Xcel uses the least expensive generation it has first and then if it needs more adds its second cheapest and so on. Since Comanche 3 is the utility’s most expensive coal-fired plant — almost three times as expensive per megawatt-hour, by Xcel’s own estimates, as its new wind farms — it would be used very little.

Keeping Comanche 3 online, if rarely used, until 2040 would also keep employment at the plant, local taxes being paid and reduce the amount that customers will pay to write-off the stranded value of the plant when it closes, Schonhaut said.

Xcel has put the cost of retiring Comanche 3, including interest payments, at $907 million, a tab the utility wants customers to pick up. Efforts to compensate Pueblo for lost taxes could add roughly another $200 million to the price tag.

In contrast to the consumer advocate, two environmental groups — the Natural Resources Defense Council and the Sierra Club — are pushing for a 2027 closure of Comanche 3, with a natural gas-retrofit of Pawnee by 2025.

The consumer advocate has expressed concern that the earlier Comanche is retired, the bigger the price tag for customers.

Still, the environmental groups’ analysis projects that the early closure would cut an additional 16 million tons of carbon emissions, bringing Xcel’s systemwide emissions reduction to 90% in 2030, while saving customers $52 million in direct costs compared to Xcel’s 2040 proposal.

“Comanche is not a cost-effective resource and a 2027 retirement will benefit customers and reduce emissions,” Noah Long, NRDC’s western region director for climate and clean energy, said in testimony.

Since its opening, Comanche has been plagued by operational, equipment and financial problems leading to more than 700 days of unplanned shutdowns, according to a report by the PUC staff.

The result was that electricity from the plant was 45% more expensive — as much as $66.25 a megawatt-hour — than forecast and operating costs at almost $35 million a year were 44% more than the projected, the PUC report said.

“PSCo asks the commission to saddle customers with hundreds of millions of dollars in early retirement costs for Comanche 3 — a plant that has significantly underperformed due to PSCo’s gross mismanagement,” the CORE Electric Cooperative, which serves about 165,000 Colorado customers between Colorado Springs and Denver, said in a filing to the PUC.

CORE, formerly the Intermountain Rural Electric Cooperative, is seeking to have documents about Comanche 3’s operations that Xcel classifies as “highly confidential” made part of the PUC public record.

The co-op, which has a 25% share in the Pueblo plant, is already suing Xcel in district court for costs it said it has incurred as a result of the Xcel’s poor management of the unit.

Pueblo has sold bonds based on Comanche revenue

Among those most vocal about keeping Comanche 3 running are Pueblo local officials and labor leaders, even though Pueblo doesn’t get any electricity from the plant. The region is served by  Black Hills Energy not Xcel.

“The continued operation of Comanche 3 through 2040 is vitally important to the economy of the city and surrounding area,” Pueblo Mayor Nick Gradisar said in PUC testimony.

Comanche 3 employs 77 workers, but the unit is responsible for generating another 334 jobs in the community, according to a study by Mike Wakefield, a Colorado State University Pueblo business school professor.

In 2021, the plant provided $31 million in county, city and special district taxes, and 16% of the county’s total taxes, according to Pueblo County Commissioner Garrison Ortiz.

“It would be a significant loss in property tax revenue,” Ortiz said. “There are 20 capital projects we’ve bonded against using three revenue streams, one of them is Comanche.”

Those projects include airport improvements, a downtown youth sports complex and a “safe routes” to school project.

In 2019, the legislature created the Office of Just Transition to help power plant and coal mining communities, and the clean energy plans must have provisions for community assistance and workforce transition.

“We formed a committee and have just started meeting,” Gradisar said in an interview, adding that keeping Comanche 3 on the books until 2040 will give the utility and the community time to work out a plan.

Small nuclear reactors are suggested

The state energy office and the environmental groups are suggesting that part of the package be a replacement of any lost tax revenues from the closure of Comanche 3 to 2040. The energy office put the figure for 10 years of tax payments from 2030 to 2040 at $181 million.

“The jobs loss and economic impact will be difficult to cope with,” Ortiz said. “We think the best solution for the whole issue is to bring in the replacement generation. It solves the property tax issue; it solves the jobs issue.”

Ortiz, in testimony to the commission, called for a SMR nuclear reactor at the Comanche site. It is a proposal that has sharply divided the Pueblo community, with dozens of citizens speaking in opposition to the idea at a PUC hearing in the city on Oct. 28.

SMR — small modular reactors — are being promoted as a more cost-effective and safer form of nuclear generation, but the first demonstration project isn’t slated to be in operation in the U.S. until 2029.

If not SMR, other technologies that provide dispatchable power, like hydrogen or biomass, ought to be considered, said Rich Meisinger, business manager of the International Brotherhood of Electrical Workers Local 111, which represents 1,800 Xcel workers. In the meantime, Comanche 3 should continue to run.

“These are energy options we should be looking at in the future for the Comanche power plant,” Meisinger said. “Communities will then still have a cornerstone they can fall back on and our members will still be working,” he said.

But Farnsworth, from Western Resource Advocates, said keeping Comanche 3 open for almost 20 more years is unlikely given the pace of coal-fired plant closure in the country, problems in the coal mining industry and increasing pressure to reduce greenhouse gases.

“It is better for the community to know now that there will be an early retirement than wait until the next resource plan,” Farnsworth said.

The only certainty is that one way or another, one day Comanche 3 will close.

“We are all climbing the same mountain to achieve a just and equitable transition and deep emissions reductions,” Hay, of the state energy office, said. “We are climbing it from different sides of the mountain.”


UPDATE: This story was updated Nov. 8, 2021, at 6:47 p.m., to reflect changes Sierra Club made to its modeling of the direct customer savings of retiring Comanche 3 in 2027. Sierra Club now estimates the savings at $52 million, but says considering the social cost of carbon, as is required by Senate Bill 236, adopted in 2019, the cost is in excess of $1 billion.


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