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The Comanche Generating Station in Pueblo on Oct. 21, 2021. (Mike Sweeney, Special to The Colorado Sun)

Xcel Energy has agreed to accelerate the closure of its coal-fired Comanche 3 power plant by five years to 2035 as part of a settlement, supported by state, local and union officials, but opposed by environmental groups. 

Comanche 3 in Pueblo, one of the largest remaining coal-fired power plants in the West, has been a flashpoint in discussions over the electric resource plan submitted to the state Public Utilities Commission by Xcel, which serves about 1.5 million customers in Colorado. 

The plan, filed every four years, outlines how much electricity the utility forecasts it will need and where it will get it.

The utility and local leaders wanted to keep Comanche 3 running until 2040. Environmental groups pressed for shuttering the plant as early as 2027.

“It comes down to a compromise,” Alice Jackson, CEO of Xcel’s Colorado subsidiary, said in an interview. “We’ve come to a constructive solution for Colorado and our customers.”

Under state law, utilities like Xcel, must reduce greenhouse gas emissions by 80% over 2005 levels by 2030. The settlement agreement will cut Xcel emissions by 87% or more by then, Jackson said. Comanche Generating Station is the largest emitter of CO2 in Colorado, releasing 4.5 million tons of the potent greenhouse gas last year.

Xcel has a company goal of 100% carbon-free electricity by 2050. 

Under the settlement, Xcel would begin cutting back Comanche 3 operations to 60% capacity in 2025 and then to 50% in 2027 and 33% in 2029.

Since it opened in 2010, the $1.3 billion plant has been plagued by operational, equipment and financial problems leading to more than 700 days of unplanned shutdowns – including all of 2020, according to a report by the PUC staff.

The agreement was filed Wednesday for PUC approval by Xcel and 17 parties, including the state Office of the Utility Consumer Advocate, the Pueblo city and county governments, the Colorado Energy Office and three labor groups.

Absent from the settlement were any environmental groups.

“The Comanche 3 coal plant is Colorado’s single largest source of climate pollution and Xcel’s most unreliable power plant,” Ren-Caspar Smith, a Sierra Club organizer, said in a statement. “This settlement is a political deal done behind closed doors, in which our political leaders have sacrificed customers and the environment in favor of lining Xcel’s pockets.”

The agreement also leaves the door open to adding new natural gas-fired generating capacity. “The OCA opposed any new fossil fuels, but in the agreement, decisions would be made on modeling assessment for new capacity,” said Cindy Schonhaut, the consumer advocate’s executive director. “In a settlement no one gets everything they want.”

That opening also worries environmentalists. “We are concerned that the settlement terms provide insufficient certainty for emissions reductions and could commit Xcel to new long-term investments in fossil-fuel resources and operations,” Gwen Farnsworth, a senior policy adviser at Western Resource Advocates, said in a statement.

The settlement, WRA said, could lead to new long-term investment in fossil fuel plants that would operate into the second half of this century.

Pueblo officials and union leaders were initially concerned about the community impacts of closing Comanche 3, but the settlement appears to have assuaged those worries.

“We’ve never had a layoff and we’ve committed to employees that we will not,” Jackson said.

As part of the settlement, Xcel will issue a request in 2027 for proposals for new generating capacity to be located in Pueblo.

Xcel will also offer “community assistance” based on the taxes the company provided to the local governments for six years after the plant closes.

The same commitment is being made to the town of Hayden in northwest Colorado, where an Xcel power plant closure will be completed in 2028, and at its Pawnee Power plant in Morgan County, where one coal unit is being retired.

Xcel is planning to seek bids for a molten salt storage facility at Hayden and is retrofitting Pawnee for natural gas.

The cost of closing Comanche 3, including paying off the unamortized part of the plant which was supposed to run until 2070, will be $668 million financed by so-called securitized bonds.

Since the bonds are linked to a guaranteed revenue source from the utility, they can be offered at low interest rates, reducing overall costs.

“This is one way to deal with rate impacts,” Schonhaut said. “Ratepayers just pay the debt on the bonds. It is a better deal for ratepayers.”

Still, there is an $8 billion price tag on Xcel’s electric resource plan, as it proposes doubling the company’s renewable energy generation and storage and adding hundreds of miles of new transmission lines.

“The move toward clean energy is going to impact consumers,” Schonhaut said. “The move to clean energy is costly. The question is, can we limit those impacts to the low end?”

PUC hearings on the Xcel resource plant begin Dec. 6.

Mark Jaffe

Special to The Colorado Sun Twitter: @bymarkjaffe