Lowering electricity bills in Colorado

Study makes the case to Colorado legislators and others about the benefits to consumers of advanced energy markets

by Allen Best

A new study commissioned by two electrical cooperatives in Colorado makes the case again for developed markets and coordinated transmission of electricity both through energy imbalance markets and, more robustly, thorough a regional transmission organization.

The news is less in the study results than the motivation of two cooperatives, Glenwood Springs-based Holy Cross Energy and Sedalia-based Intermountain Rural Electric Association. Why did they pay for this study?

What benefits do they see for their customers in Vail, Basalt and Parachute, in the case of Holy Cross, or Castle Rock, Conifer and Bennett, in the case of Intermountain? We’ll get to that.

First, the results by Vibrant Clean Energy, a company based in Boulder, that is said to have the capabilities to analyze benefits of the evolution in electrical generation and deliver better than any other company.

Integrating Colorado into a regional energy market could save the average residential electricity customer $255 per year by 2040 as compared with today, according to the study posted last week. The annual savings across Colorado would be $1.76 billion.

See the full report here. And the PowerPoint here.

The first baby step is creation of energy imbalance markets, which Colorado’s utilities have set out to do. An energy imbalance market is described as a low-risk, low-reward step that helps match supplies and demands across multiple utilities. Colorado will have two within a couple years.

Tri-State Generation and Transmission made the first move last September, announcing that it and the Western Area Power Authority were joining an energy imbalance market being created by the Arkansas-based Southwest Power Pool.

Duane Highley, chief executive of Tri-State, has said repeatedly that the costs of creating the market can be recouped within three years from the benefits it will deliver.

Then, in December, Xcel Energy and three other utilities along the Front Range of Colorado announced they would join an energy imbalance market being created by CAISO, or the California Independent System Operator.

The real prize will be creation of a regional transmission organization, or RTO, which requires more investment—and delivers far greater benefits.

Greater benefits to the west

The Vibrant study says utilities will benefit from going either eastward, into the Southwest Power Pool, or westward, toward an alignment with CAISO.

Even greater benefits would accrue from an alignment with other utilities in Western states. This arrangement would allow Colorado to better develop its wind and solar resources for export to other Western states, according to the study. It also facilitates an easier transition to meet Colorado’s targeted greenhouse gas emissions. It would produce a 1,000-megawatt increase in wind and solar in Colorado along with 70,000 new jobs by 2040 in the electricity sector.

The general gist of this is not new, but this study offers a greater level of detail and authority than was previously available.

A press release from Vibrant offered statements from the chief executives of the two electrical cooperatives who funded the study. They indicated hope that thestudy triggers more rapid movement toward creation of an RTO or its sibling, an ISO (independent system operator).

“Using this study as a guide, Colorado can improve transmission access and tariffs within its borders before all electricity companies join the same Energy Imbalance Market,” said Bryan Hannegan, CEO of Holy Cross Energy.

“The key is to have fixed or zonal transmission tariffs across Colorado with all entities having equal access to a system developed through coordinated regional or statewide planning,” said Patrick Mooney, chief executive of Intermountain.

Both electrical cooperatives have relationships with Xcel Energy but are weaning themselves. They both depend, in part, upon Xcel for supply of electricity. Both depend upon Xcel for transmission. And both are part-owners with Xcel of Comanche 3, the coal-unit completed in 2010 at Pueblo. Intermountain owns 25% of the coal-burning unit and Holy Cross 8%. Holy Cross, however, has assigned its output to Guzman Energy, a wholesale provider.

And both electrical cooperatives have set out to shift their generation sources. That necessarily brings in questions of transmission and associated costs. Transmission lines are not like interstate highways, where you just get on and drive. They’re more like toll roads. Getting electrical generation from the giant wind farms of eastern Colorado to consumers on the Western Slope can involve three or more tolls. The electrical co-ops believe there’s a better way.

Holy Cross has set out to decarbonize its electricity through a program called Seventy70Thirty, which aims for 70% renewable energy by 2030. This would align roughly with Xcel’s current plans. But Holy Cross has begun developing its own energy resources, including a wind farm along Interstate 70 east of Denver that will, when completed in the next year or two, put it substantially close to achieving that goal.

Intermountain looks for options

Intermountain has already asked for proposals to supply its power once its current power-purchase agreement with Xcel Energy’s subsidiary, Public Service Co. of Colorado, ends in late 2025.

With that in mind, said Mooney, his cooperative wants to advance an RTO. “We see (it) as important to the integration of renewable energy and necessary to maximize efficient use of generation and transmission resources. Several of the large players, Xcel included, are in no hurry to see an RTO in the region, public statements to the contrary notwithstanding,” he wrote in an e-mail response to questions.

In a follow-up email, Mooney elaborated: “My view is that Xcel and Tri-State are really only giving lip service to an RTO at this point; neither wants to create an environment in which currently captive load for their generation may be able to go to a market. They also like to control their respective transmission systems, and Xcel’s plan is to grow by expanding its transmission and generation rate base, a plan that could be threatened by an RTO,” he wrote.

“Xcel, Platte River Power Authority and Colorado Springs Utilities like the EIM (energy imbalance market) arrangement, as all profit from it, but it doesn’t have the benefits we would see from an RTO.  None of those parties has been willing to lift a finger legislatively to support an RTO.  Indeed, all have opposed efforts to bring players to the table through legislation.”

Intermountain, he said, proposed legislation in 2019 and again this year and has been working with several legislators.  “Of course, there are real limits to what the state can do, and it’s not even clear what direction (east or west) would be best in the long run,” he wrote in an e-mail in response to questions.

The Vibrant study was commissioned by Holy Cross, he explained, “and we agreed to participate expecting some work product to educate people about the subject.”

State Sen. Chris Hansen, a legislator heavily involved in energy legislation and an ardent supporter of organization of an RTO, suggested in a recent video-conference meeting he might be interested in sponsoring legislation to give utilities encouragement to engage in energy markets. See: Why Colorado needs an RTO

Good data for regulators, legislators

At Holy Cross, Steve Beuning, vice president, power supply and programs, said there are no specific plans to seek a legislative prod to creation of an RTO. But neither is the study purely academic.

“If we are going to inform regulators and legislators about the benefits of a regional development, we need a model that has a clear view of the entire landscape and not just the interests of an individual utility,” he said in an interview.

Vibrant, he said, has modeling for the entire North American grid, including the wind and solar capacities down to a resolution of three kilometers. “I am not aware of any utility in the United States that has that level of modeling detail,” he said. Most model only for their own service territories.

Beuning explained that electrical transmission of wind or any other electric resource can pass across lines of three or even five different operators. An RTO dismantles those barriers. Think of it being something like an Epic or Ikon ski pass, good at many ski areas.

Another comparison is to roads. You don’t have to pay tolls three or four times as you cross Colorado. And in the United States, you can travel anywhere with one state’s license plates.

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Allen Best