Facing questions over its cost, efficiency and environmental impact, the Colorado Public Utilities Commission decided Wednesday to hold hearings on Xcel Energy’s proposed $155 million Mountain Energy Project.
The proposed plan aims to deal with potential gas shortages at the ends of its Eastern Mountain Gas System in Summit and Grand counties — primarily in Grand Lake, Breckenridge and Keystone.
Xcel Energy had determined that the combination of a growing population and limits on the compressor station in Boulder County pumping natural gas to the mountains could lead to “insufficient pressure at the tail ends of the natural gas system during the coldest days.”
The utility’s proposed solution, which was submitted in January to the Colorado Public Utilities Commission for approval, calls for a combination of switching some gas demand to electricity, reducing demand during peak periods and modular gas facilities in Breckenridge and Keystone.
Shifting demand to electricity — by homes switching to heat pumps from gas furnaces, for example — could raise overall electricity demand by 5%, or 8.3 megawatts, and necessitate $28 million in electrical upgrades in Breckenridge and Leadville, the utility estimates.
A liquified natural gas facility, with storage tanks, pumps and a vaporizer, would be placed in Breckenridge and a compressed natural gas unit would be located in Keystone.
When natural gas pressure in the distribution system dropped with increased demand, gas would be injected into the system from the facilities, which will cost a total of $78.6 million.
The remainder of the $155 million would go to rebates for customers switching to electric and energy efficient appliances and a demand response program in which customers would be incentivized to reduce the use of gas during peak periods.
This approach, Xcel Energy said, would allow the utility to avoid building more expensive pipelines and compressor stations, which could become stranded assets as the utility plans to reduce gas sales under its Clean Heat Plan.
Should Xcel be allowed to “socialize” the cost across all Colorado customers?
In a PUC filing the company said it would take 20 years to fully pay off the investment for the Mountain Energy Project, compared with 72 years for a pipeline project, reducing the risk of stranded assets.
The project is “the largest at-scale, non-pipeline initiative in the country,” according to the company.
However, commission staff, the Colorado Office of the Utility Consumer Advocate, environmental groups and some of the mountain communities have raised questions about the project and asked the PUC to set a hearing on the plan.
Ron Davis, the commission’s chief advisor, said the staff wants to ascertain if this the lowest-cost solution, if the project’s demand management and electrification projections are reasonable, whether cost recovery mechanisms are equitable and if electrification upgrades are necessary.
In a filing, the consumer advocate noted that the $155 million project will serve 33,500 people in the mountains at a cost of more than $4,600 per person, Davis said.
The Sierra Club, an environmental group, filed to intervene in the case raising questions about whether the plan for the LNG and compressed gas facilities still risk becoming stranded assets and if they are in line with state goals of reducing the use of natural gas.
Also seeking to intervene is the Mountain Community Coalition, which is composed of Summit County and the towns of Blue River, Breckenridge, Dillon, Frisco, Keystone and Silverthorne.
“The Mountain Community Coalition understands the need for new or modified energy infrastructure to deliver both electricity and gas to their residents but has an interest in ensuring that the infrastructure is developed in a way that balances different interests, such as environmental preservation and residents’ quality of life,” the group said in a filing.
In voting to set a hearing, PUC Commissioner Megan Gilman said the project is “unique and new and raises policy questions.”
PUC Chairman Eric Blank said he was concerned about “socializing the costs across all customers” rather than those receiving the benefits. “This is a discrete system. It should pay for the cost of the upgrades required.”