The Colorado Public Utilities Commission moved Wednesday to provide more financial aid to coal communities to help in their economic transition with one caveat: Their coal-fired power plants actually have to close.
The commission voted to boost compensation for lost taxes by 13% to more than $230 million and increase the bonuses to energy developers locating projects in coal communities.
“The commission recognized how challenging the transition is for communities and workers,” said Wade Buchanan, director of the Colorado Office of Just Transition, the agency created to help communities as coal-fired power generating plants and the mines that fuel them close.
“These communities need support while diversifying their economies as they lose their main economic drivers,” Buchanan said.
Colorado’s six coal-fired power plants are slated to close by 2031, but recent events led the commission to say that aid depends upon on-time closures and that extending the life of a coal plant could lead to reduction in assistance.
“Payments under this program assume the scheduled closures follow the established plan,” PUC Commissioner Tom Plant said. “If that changes, then a future commission should re-evaluate the commitments that we make here.”
The aid, PUC Chairman Eric Blank said, “shouldn’t be in addition to an operating plant. … I think we can put that in this order.”
The four plants covered by the just transition aid are operated or owned in part by Xcel Energy: the Comanche Station in Pueblo, the Hayden Station in Routt County, the Craig Station in Moffat County and the Pawnee Station in Morgan County.
Craig Unit 1 was scheduled to close at the end of 2025 but was ordered to remain in operation by the U.S. Department of Energy, which cited an emergency need for power. It was already closed due to a mechanical breakdown.
The Craig unit is one of five coal-fired power plants ordered to stay open under DOE emergency notices and is part of the Trump administration’s push to bolster the coal industry.
On Jan. 9, the federal Environmental Protection Agency rejected Colorado’s regional haze plan because it relies on closing coal-fired power plants, saying the plants are needed for “grid reliability.”
In Pueblo, Unit 2 of the Comanche Station was also slated to close Dec. 31, but the PUC approved extending operations for 12 months because Comanche Unit 3, scheduled to close in 2031, broke down in August.
A final closure date for Comanche 2 was left open in Xcel Energy PUC filings, while repairs to Unit 3 are not expected to be completed until June. The cost of those repairs was redacted in a PUC filing.
Comanche 3 is the biggest and most expensive coal-fired plant in Colorado.
Although not part of the Xcel Energy just transition plan, Colorado Springs Utilities is also seeking to extend the life of its Ray D. Nixon coal-fired power plant, which is scheduled to close in 2029.
It was against this backdrop that the PUC agreed to add more money to the Xcel Energy just transition plan to close coal-fired power plants and meet the requirements of 2019 legislation to help hard-hit coal communities.
Shutting the plants will put a 10% to 50% hole in the tax base of these communities and lead to the loss of hundreds of jobs, according to PUC filings by the impacted counties and municipalities.
Tax credits dangled for coal-power replacement
In November, the PUC approved a just transition package that was challenged by three of the four affected counties. They asked for a rehearing and Wednesday and the PUC granted some of the requests.
Xcel Energy had proposed giving developers a credit on, up to $4 for each megawatt of generating capacity, for a project located in Pueblo County.
The credits would give a developer an edge in placing a new power plant or large-scale battery storage facilities project in a coal community.
The commission, however, concerned that the credits for job creation and property tax replacement could be “gamed” limited the credit to $2 per megawatt.
In its rehearing request, Pueblo argued the full credit was needed “to drive projects into coal communities, including Pueblo, and could result in replacing the number of jobs and the tens of millions of dollars in property taxes that will be lost when Comanche 3 closes.”
The commission agreed and Blank, the PUC chairperson, said his concerns over gaming the system had been addressed. In addition to $2 base credit, the commission restored credits of $1 per megawatt for creating more than 20 jobs and $1 per megawatt projects adding $4 million in property taxes were added.
The credits will apply to projects in all just transition communities. “These bonuses could be big,” the Office of Just Transition’s Buchanan said.
Pueblo also negotiated a $16.7 million a year payment from Xcel Energy for 10 years to make up for lost property taxes from Comanche 3.
That agreement also included six years of payments for the Hayden Station and six years of payments for Xcel Energy’s fractional ownership of the Craig Station.
But Routt County and the town of Hayden pressed the PUC for 10 years of payments, as was offered to Pueblo. So did Moffat County and the city of Craig.
The PUC agreed. The extra four years of payments raised the total amount Routt County will receive to $27 million, up from $16.2 million. Moffat County will get $6.5 million up from $3.9 million.
Morgan County did not petition for a rehearing but their payments were also extended to 10 years for a total of $20.9 million, up from $13.7 million for six years.
The PUC, however, rejected a request from Routt County and Hayden for $11.5 million in economic development funds, and a request from Moffat County and Craig for $14.8 million in worker impact funds since most workers at the Hayden Station live in Moffat County.
“At the end of the day we didn’t know if there would be any movement,” Routt County Commissioner Sonja Macys said. “The 10 years is better than what was previously proposed, but it is disappointing that they didn’t appoint the economic development funds.”
Her sentiments were echoed in an email from Moffat County Commissioner Melody Villard. “We are appreciative of the Commission’s decision to revisit and revise their decision. We are disappointed that portions of our carefully considered request were not allowed.”
Unlike lost property tax payments, economic and worker costs are more difficult to calculate and granting payments only to these counties would leave Pueblo and Morgan County out of the funding, Michael Eden, a PUC adviser told the commission.
The transition funds will come from Xcel Energy customers and the Colorado Office of the Utility Consumer Advocate, which represent residential and small commercial customers, supported the coal communities’ requests.
“It is our duty to support these communities as our energy sector transitions,” Joseph Pereira, deputy director of the consumer advocate office, said in a statement. “This decision is responsive to the requests of the communities and recognizes our responsibility.”