PUC expert calls out ‘perverse incentive’ in renewable program

Xcel Energy is manipulating Colorado’s renewable energy policies to reap profits from ratepayers above and beyond the allowed amount, according to a Public Utilities Commission renewable energy expert.

“It is now well known that [Xcel] has far exceeded its available budget for renewable resources and that the Company has been loaning money to the [Renewable Energy Standard Amendment] fund – and earning its rate of return on those funds – to allow it to acquire more renewable resources than it needs for RES compliance,” renewable energy expert Richard Mignogna testified last month.

He questioned whether the PUC should put the brakes on its demand for wind. Mignogna argues that Xcel uses the interest it collects from ratepayers for its solar commitments to invest in wind resources that it then sells to California in order to turn a tidy profit.

“The Company’s renewable energy acquisitions have already far exceeded its RES obligations. Exacerbating this problem and creating a perverse incentive is the fact that the Company is earning a profit on the sale of the excess Renewable Energy Credits which were paid for with interest by ratepayers. The Company is profiting on both ends of this deal and has exercised inadequate fiscal restraint,” he wrote March 16 on the PUC’s latest Electric Resource Plan.

Xcel, aka Public Service Co., has exceeded its available budget under the Renewable Energy Standard Amendment fund, which he claimed is projected to end 2011 with a $97 million deficit.

“While PSCo typically argues that it is only charging customers the two percent allowed by the statute, that argument is disingenuous. As we now know, the Company has been loaning money to the RESA, earning its rate of return on the funds advanced, so that it can acquire more RECs than it needs only to sell them into California so that it can then claim a percentage of those proceeds,” Mignogna wrote.

Xcel spokeswoman Michelle Aguayo blamed the negative RESA balance on payments the company had been making to the Solar Rewards Program ― payments it recently reduced ― and she said the shortfall has “relatively nothing to do” with excess renewable wind credits it has sold to California.

The renewable energy wind credits Xcel is selling are not funded out of RESA, she said. They were acquisitions that the PUC previously ordered based on the 2005 All Source Request for Proposals.

“Selling RECs into CA is a win-win for both our customers and the Company,” Aguayo wrote in a recent email interview. “We are under no obligation to seek out buyers of RECs but we believe it is a prudent thing to do. We negotiate a good price on behalf of our customers. Both of these actions produce margins that are shared back with our customers. Clean energy is good for Colorado. The legislature gave us limited funds that we could use to purchase renewable energy. By selling excess RECs we are stretching this very limited fund of money. This is not being disingenuous.”

Still, in light of the acquisition of more renewable resources than is actually mandated, Mignogna questioned “whether acquiring any resource in the 2011 Wind RFP is prudent. The company should not be permitted to advance funds, and earn interest on them, simply to acquire resources that it may then sell into other jurisdictions so that it may profit additionally from the sale,” he testified.

Xcel, meanwhile, is planning to double its wind resources by 2020.

Troy Hooper covers environmental policy for the American Independent News Network. His work has been published in The Denver Post, Rocky Mountain News, Huffington Post, San Francisco Weekly, Playboy, New York Post, People and dozens of other publications. Hooper has covered the Winter Olympics in Italy, an extreme ski camp in South America and gone behind the scenes with Hunter S. Thompson on election night in 2004. Born and raised in Boulder, Hooper has a bachelor's degree in English from the University of California at Santa Barbara.