Colorado 2012 Renewable Energy Standard Compliance Plan

Xcel Energy filed with the Colorado Public Utilities Commission (CPUC) its 2012 Renewable Energy Standard Compliance Plan, showing its continued work to meet the state’s renewable energy standard of 30 percent renewables by 2020. The regulators’ decision on the filing is expected in early 2012 after public comment and hearings on the plan are completed.

The filing highlights that Xcel Energy is well ahead of targets to meet the renewable energy standard. It also proposes the level and pricing for its Solar*Rewards program through 2013.

The company plans to continue on the path outlined in the March 2011 settlement with the solar industry and to acquire up to an additional 30 megawatts of customer-sited solar energy each year in 2012 and 2013. The 30 megawatts is double the amount of customer-sited electricity above what is needed to meet minimum compliance with the renewable energy standard.

The proposed 2012 plan also aims to balance the Renewable Energy Standard Adjustment (RESA) fund—money collected from a two percent charge on customers’ electricity bills and used by Xcel Energy to cover the cost of renewable energy. More money for renewable energy projects has been spent than received from customers. Xcel Energy advanced funds to the RESA, as encouraged by law, to help “jump start” the solar industry and customer interest in solar, and to maintain its steady level of support for solar installers in Colorado.

• Q:
  What is the Renewable Energy Standard (RES)?
  A:
  In 2004, Colorado voters approved Amendment 37, which established a renewable energy standard requiring electric utilities that served 40,000 or more customers to obtain 10 percent of retail sales from renewable energy resources by 2007. The legislation also included a requirement that four percent of the renewable energy be supplied by solar resources, half of which must be from on-site solar. In 2007, the General Assembly increased the renewable energy standard to 20 percent as of Jan. 1, 2009. Then in 2010 the standard was again increased. The passage of House Bill 10-1001 set a target of 30 percent of retail electricity sales by 2020 and a requirement that three percent of the renewables be from distributed generation, such as on-site solar.
• Q:
  Why is the RESA balance negative?
  A:
  The law that created the renewable energy standard and the renewable energy standard adjustment also allowed Xcel Energy to advance funds from its investors to provide incentives for on-site solar installations. The rationale for that part of the legislation was that “jump starting” the market initially could lead to technological advances and installation efficiencies that may drive down the cost of solar energy. Significant cost reductions have been realized. Customer investment has been stronger than anticipated plus solar panel prices have dropped. In addition, federal incentives increased and third-party ownership was allowed — all of which led to paying more incentives than the annual receipt of $50 million in RESA funds. The 2012 compliance plan proposes measures to eliminate the RESA deficit in 2016-2017 and keep payments in check with the RESA balance in the future.
• Q:
  Is Windsource affected by this filing?
  A:
  There are no changes to Windsource pricing proposed in this filing. Windsource costs and premiums are included in the RESA.
• Q:
  How are carbon emissions treated in the filing?
  A:
  Our previous compliance plans approved by the Public Utilities Commission included an assumption that a federal tax would be imposed on carbon emissions. To more accurately estimate the total cost of electricity generated by fossil fuels compared to renewables, we included a factor of $20 per ton of carbon beginning in 2010, escalating at 7 percent annually. A carbon tax did not materialize, so the 2012 Compliance Plan does not include carbon costs in its planning horizon. Starting in 2014, we include a carbon assumption of $20 per ton and escalating at 7 percent annually, the same assumptions used in our Clean Air-Clean Jobs plan.
• Q:
  Doesn’t the Electricity Cost Adjustment (ECA) pay for some renewables costs?
  A:
  Yes. The costs equivalent to our avoided cost are recovered through the ECA. Costs above the avoided cost are charged to the RESA. This split is consistent with directives regarding the retail rate impact from the legislature.
• Q:
  Why is Xcel Energy going above what’s needed to meet the renewable energy standard?
  A:
  For minimum compliance to meet the renewable energy standard, we would need to acquire 16 megawatts of retail distributed generation per year. Our proposal more than doubles that amount. The plan pays for performance, so there is less impact on the RESA than in the past. It balances the customer’s interest with our desire to continue support for the solar industry. This option enables a higher level of annual acquisition than minimum compliance plus continues to provide incentives for customer interest in solar and maintains steady support of the state’s solar industry. The compliance plan also discusses the issue that Solar*Rewards customers do not pay their portion of the embedded cost of the electric system (distribution and transmission) that enables their use of Xcel Energy electricity when their own solar energy is unavailable.
• Q:
  What are the process and timelines for the filing?
  A:
  We filed the 2012 proposal with the Colorado Public Utilities Commission on May 13, 2011. The PUC then will solicit public comment about the plan and review the proposal itself before making a decision. We expect a PUC ruling in nine to 12 months.
• Q:
  How does this plan compare with/differ from the Resource Plan?
  A:
  The compliance plan works in concert with the 2011 Electricity Resource Plan that will be filed with the PUC this fall. The compliance plan focuses on meeting the state’s renewable energy standard. The resource plan anticipates and estimates Colorado’s electricity needs for 40 years, with emphasis on action to meet that need in the next 10 years. The Resource Plan also proposes how to meet that need—including determining specific energy sources such as the use of renewables or fossil generation—and estimating costs and the impact of the plan on rates. It also looks at electricity that will be generated from Xcel Energy-owned power plants and that which could be purchased from independent power producers.