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Carbon Loading

Xcelís solution to rising energy prices includes a lot of coal. Is that a bad thing?

It's an annual rite of fall, right up there with hot cider, Columbus Day trash-talking and Mike Shanahan's vow to take one game at a time. Between the time the first aspen turns and the probable Halloween slush storm, you can count on Xcel Energy to announce a humongous hike in the coming winter's energy bills.

This year, in an effort to defuse consumer wrath over a double-digit, double-whammy increase in heating and electricity rates, Xcel brought out the big guns. Two weeks ago, Richard Kelly, CEO of the Minnesota-based energy giant, faced the television cameras at Xcel's downtown-Denver headquarters and let customers know he feels their pain.

"It looks like natural-gas prices are going to be up 35 percent compared to the same time last year," Kelly said. "We view it as a state and, in fact, a national crisis."

He hastened to add that the company was merely passing on increases in the cost of natural gas as a result of production woes caused by the hurricanes that have hammered the Gulf Coast. If there was any gouging going on in the wholesale market -- the price of natural gas has tripled since 2002 -- that was "for someone else to say." Kelly also announced a series of steps that the $8 billion company is taking to ease the blow, including a donation of up to $3 million to Energy Outreach Colorado to assist low-income households in paying their utility bills.

Kelly soon yielded the podium to a grateful Skip Arnold, executive director of Energy Outreach Colorado, and Drew Bolin, head of the Governor's Office of Energy Management and Conservation, who urged consumers to weatherize their homes, turn down the thermostat and close off rooms. As they spoke, U.S. Department of Energy officials in Washington, D.C., were unveiling their own campaign to get Americans to conserve energy this winter. But even the DOE couldn't offer a definite forecast for how long the National Crisis would last.

Oh, the irony, the pathos, the sheer déjà vu of it all. The last time so many corporate and government leaders were grimly urging the citizenry to bundle up, the president of the United States was a peanut farmer who held press conferences in a bulky sweater. Back then, natural gas was regarded as a cheap, reliable fuel source -- not only for heating homes, but for electricity generation as well. In the 1990s, like a lot of power companies, Public Service Company of Colorado (Xcel's predecessor) became increasingly reliant on natural gas to meet the state's growing demands for electricity. Now almost half the juice Xcel produces in Colorado comes from its own natural-gas plants or contracts with independent gas companies, resulting in a stiff hike in electricity rates as well as heating costs.

Kelly insisted that Xcel is developing a "balanced portfolio" of power sources so it will be less dependent on the steeply climbing gas market. "You don't want to bet your future on one fuel," he said.

Having wagered heavily on natural gas, the company is now about to make a substantial hedge bet -- with customers' cash, of course -- on an ancient, much-scorned fuel. By the end of October, Xcel expects to break ground on a $1.3 billion expansion of the Comanche Steam Electric Generating Station, its coal-fired power plant in Pueblo. The new unit will produce 750 megawatts of electricity, more than double the capacity of the existing two boilers. (A megawatt is roughly enough power to supply 1,000 homes.) Although ratepayers will end up funding the project for years to come, company officials insist the move will save its customers up to $500 million in electric bills over the next three decades by using relatively cheap, abundant coal (rather than natural gas) to generate power.

"We have a need for more baseload generation," says Xcel spokesman Mark Stutz. "It's our opinion you need to get that generation from coal because that's the most stable and reliable of the fuels."

But Xcel's decision to expand the plant has also generated considerable anguish in Colorado's environmental circles and among community activists in Pueblo. Traditional pulverized-coal plants are notorious polluters, spewing mercury, sulfur dioxide, particulates and other emissions into the air. They use obscene amounts of water. And even with various anti-pollution measures and improved technology, the new Comanche unit will produce roughly 6.5 million tons of carbon dioxide a year. Many scientists consider heat-trapping CO2 emissions to be the primary culprit in global warming, accelerating the serious changes in climate that the planet is expected to endure in the next few decades.

"Building a coal plant locks you into a fossil-fuel decision for the next fifty years," says Leslie Glustrom, a Boulder biochemist and vocal opponent of the plant. "The infrastructure decisions we make now are so important. They determine whether we do something that's just terrible or something that's absolutely catastrophic."

When Xcel brought its Comanche plans to the Colorado Public Utilities Commission for approval last year, environmentalists raised a host of objections. But by December, most of the opposition had evaporated, thanks to an unprecedented settlement agreement negotiated between the company and a coalition of labor, civic and green organizations. Among other provisions of the deal, Xcel agreed to install state-of-the-art pollution controls in the new unit and clean up sulfur dioxide and nitrogen oxide emissions from the existing units; committed to invest close to $200 million in energy-efficiency programs over the next eight years; and vowed to obtain far more power from wind and other renewable energy sources than it was required to do under Amendment 37, a ballot initiative that Colorado voters passed last year. In return, the coalition agreed not to fight the plant before the PUC or in court.

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