Heated coal vs. gas battle comes to a head with key PUC decision

Both Xcel Energy and environmental groups cautiously praised Thursday’s unanimous decision by the Colorado Public Utilities Commission (PUC) to convert the Cherokee 4 coal-fired power plant unit to natural gas. But both sides are clearly still concerned about the details in the plan.

Xcel officials originally wanted to keep Cherokee 4 running on coal until 2022, five years past the 2017 deadline mandated by the Clean Air, Clean Jobs Act for cutting nitrogen oxide emissions by at least 70 percent of 2008 levels in order to comply with federal clean-air standards.

Then the state’s largest electrical utility recommended installing expensive new emissions controls. Other state agencies and Gov. Bill Ritter’s office preferred shutting the plant down altogether in 2017 and replacing it with a brand-new natural gas-fired facility.

Ultimately, the three PUC commissioners decided to convert the plant to natural gas, although on Thursday they didn’t set a date certain for doing so. They still could do so by the time they issue their final written order by the Dec. 15 deadline, and Xcel still has to sign off on that plan.

“While the approved plan does not include all of our recommendations, it will greatly improve air quality and better position our state to meet current and reasonably foreseeable air quality requirements,” Xcel spokesman Mark Stutz said in a release.

“We are hopeful that we can make this plan work, but we will need to review their order carefully to determine if we think it will work for our customers and to be sure we can implement the plan.”

The Cherokee 4 unit was the last major sticking point in a months-long negotiation that has been blasted by Colorado’s coal industry as a job-killer that will jack up electrical rates for consumers in a down economy. It has been supported by the natural gas industry, which wants to see a bigger local market for their product, which burns about 50 percent cleaner than coal.

The Xcel plan, which includes shutting down several other aging coal-fired plants in Denver and Boulder, converting another one to gas and adding emissions controls to two other plants around the state, will reportedly cost more than $1.3 billion and add a nearly 2.5 percent average annual rate hike to the monthly bill of Xcel’s 1.35 million customers.

Pleased that more than 500 megawatts of aging coal-fired power generation will be eventually shut down, conservationists still want to make sure Cherokee 4 in Adams County — deemed the most polluting unit on the Front Range — is definitively dealt with and won’t eventually be re-converted to running on coal at some point in the future.

“Until there is certainty as to when that plant will be shut down, there are risks that the largest source of pollution in the heart of Denver could be switched back to coal or that we will operate this inefficient unit too long and postpone the transition to a more modern power system,” said John Nielsen, energy program director with Western Resource Advocates.

At least one of the PUC commissioners, James Tarpey, wanted to maintain flexibility and not put too much emphasis on natural gas in case markets change and supplies drop off. PUC Chairman Ron Binz advocated for the conversion option for Cherokee 4, and it’s Binz who has taken perhaps the most heat from the state’s coal industry.

“Despite the coal industry spending millions of dollars in a smear campaign to derail the proceedings, the commission held strong and made a critical decision to clean up our air,” said Pam Kiely, program director of Environment Colorado. “We hope the commission finishes strong by including a firm retirement date for Cherokee 4 in their forthcoming order.”

In a joint statement last month, seven Republican state lawmakers called on Ritter to get ride of Binz, whom they accused of colluding with Xcel to write the Clean Air, Clean Jobs Act last session.

“Even if one is acting with the most noble of intentions, the appearance of impropriety is so great in this case that it taints not only this proceeding but possibly future proceedings conducted by the Colorado PUC,” the seven lawmakers wrote in a Nov. 7 release (pdf).

One of the lawmakers was state Sen. Al White, R-Hayden, who told the Colorado Independent in September he opposed the bill because of its potential economic impacts in his Northwest Colorado district and his own doubts about climate change.

“If we can take sane and reasonable steps to mitigate whatever impact we might be having [on the climate], then that’s a responsible thing to do, but given my uncertainty of what the cause is, it’s not responsible for us to do it to the extent that it’s going to cause our energy costs to go through the roof,” White said.

White’s a former ski shop owner who doesn’t see Colorado’s coal industry as a threat to its outdoor recreation and tourism industries. Others in that sector strongly disagree.

Aspen Skiing Company director of sustainability Auden Schendler lauded the PUC action: “We see this as a vote for the state’s tourism economy and a nation-leading stance on cutting carbon pollution. The PUC’s action is long overdue recognition that we are a better, stronger state without brown haze and asthma-causing pollution.”