By Joel Warner
By Michael Roberts
By Joel Warner
By Michael Roberts
By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
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.
"We don't like the plant, but being realistic politically, we saw very little chance of stopping it," says Howard Geller, director of the Southwest Energy Efficiency Project, one of the groups involved in the settlement. "It's technically and economically feasible to meet the energy service needs of our growing population in Colorado without this new coal plant. But the rules and the decision-makers we have, in my view, would not get us to that outcome. We made this agreement to avoid two or three new coal plants."
Not all of the plant's opponents joined in the settlement. The diehards -- notably, Citizens for Clean Air and Water in Pueblo (CCAWP) and Glustrom's group, Clean Energy Action -- say they welcome Xcel's concessions but that the deal doesn't address their concerns about mercury, water consumption and carbon dioxide emissions. They insist that the move into coal is based on flawed assumptions about the plant's operational costs in coming years, and that the "savings" Xcel is promising customers from such a pricey investment in an antiquated fuel source could be elusive. In August they filed a lawsuit against the Colorado Department of Public Health and Environment, claiming that the state violated its own laws in approving an air permit for the new unit.
"It's fine for some groups to negotiate settlements with industry," says Margaret Barber, an English professor at Colorado State University's Pueblo campus who is CCAWP's spokeswoman. "They can do what they want. But that does not absolve the state of having to do its job in enforcing the law. The state regulatory agencies are headed by political appointees, and it's my belief -- how should I put this -- I have a feeling those appointees consider it their job to protect industry from the necessity of complying with the law."
The state approved construction of the new unit even though the Environmental Protection Agency has charged that the existing plant is in violation of the federal Clean Air Act -- a claim Xcel disputes. Although the company pledged to reduce sulfur and nitrogen emissions as part of the project, that's not the way the enforcement process is supposed to work, Glustrom maintains.
"You shouldn't get to build a whole new coal plant for doing something you were supposed to do anyway," she says. "It would be nice to get those units cleaned up, but mercury is going to go up. They're going to double carbon dioxide and particulates. What they're doing is asking us to ignore everything else that comes out of coal plants."
Stutz describes Glustrom and the other plaintiffs in the lawsuit as critics on the fringe, as opposed to the "mainstream" environmental groups that signed the settlement. "There are always going to be some groups that think Xcel doesn't do enough, that don't want to see another coal plant built in the United States -- and who suffer from the misconception that we can meet our growing demand for electricity from renewables," he says. "It really takes a combination of a whole bunch of generating sources to make sure we meet demand."
The Bush administration's quest for greater domestic energy production and weaker environmental regulations has prompted dozens of new coal-plant proposals across the West. The groups that would customarily oppose the belching beasts know they have to pick their battles carefully; with state and federal regulators and the major greenies on board, there's little chance Xcel won't have its way in Pueblo. But if the critics are right, the company's customers will be paying off on a billion-dollar bad bet for a long, long time.
The need to boost power generation in Colorado stems from two inexorable forces. The first is the state's growing population, which nudged Xcel's customer base by 20 percent in the past decade. The second is that, despite improvements in energy-efficient appliances and the like, individual consumers and businesses are gobbling up electricity like never before. As a result, Xcel is now expected to supply Coloradans with 60 percent more electricity on peak demand days than it did ten years ago.
Company officials say it's not possible to meet the state's power demands without more coal providing at least part of the load. Natural gas is too expensive, they say, nuclear power is politically unfeasible, and the much-touted renewables, notably solar and wind power, are too unreliable for "baseload" generation -- plants that run 24 hours a day, 365 days a year (see sidebar).
"We have to build our power plants to meet the Easter Sunday crowd," says Stutz. "We have to look at what our highest peak demand is going to be in one hour of one summer day and how we're going to have the generation to meet that. You can count on the wind blowing about 30 percent of the time, but you can count on people using electricity 100 percent of the time."
Coal is plentiful -- and a bargain compared to competing fossil fuels. Wyoming's Powder River Basin now has the largest coal mines in the world; power plants back east are clamoring for western coal, which is far lower in sulfur than the Appalachian variety. According to the Colorado Geological Survey, Colorado has more than 16 billion tons of mineable coal and twelve operating mines, making it the sixth-largest coal-producing state in the nation; at the current rate of production, it would take 400 years to extract it all. Nearly half of the electricity that Xcel produces in Colorado, and 80 percent of the entire state's power, comes from burning coal.
Prior to the 2000 merger of its parent company with Xcel, Public Service Company of Colorado hadn't built a coal plant in this state since the early 1980s. But Xcel has "had expertise over the years at building coal-fired plants," Stutz notes, and a 750-megawatt addition to the Comanche station soon became a key element in the company's plans for future power generation. (Xcel will net only 500 megawatts from the project; the rest is going to rural electric companies.)
The regulatory climate was right for the move, too. At a national level, EPA efforts to enforce Clean Air Act provisions were under attack in the courts and being overhauled -- some would say gutted -- by the Bush administration. At the state level, Public Utilities Commission chairman Greg Sopkin, an attorney who had once done work for Xcel, was an unabashed proponent of the coal boom; two years ago, he even wrote an op-ed piece in the Rocky Mountain News praising the "long-term benefits" of coal plants over natural gas.
A PUC provision requires Xcel to seek competitive bids for any new power source of more than 250 megawatts. One of the company's first moves was to seek a waiver of that provision for its new coal plant; the PUC readily granted the request.
The waiver saved time and money, Stutz says. The company didn't get any coal bids when it unveiled a similar proposal in Minnesota a couple of years ago, and adding a unit to the existing Pueblo operation will be more economical than going to the open market. "Nobody can probably do a coal plant as well as we can, because it's a brownfield [already developed] site," he says. "You have a tremendous advantage right there. You already have the equipment in place."
Major environmental groups taking stock of the situation soon realized they were in a better position to negotiate conditions for the plant than to try to stop it. Recognizing that Xcel officials were concerned that litigation would raise construction costs and strain the patience of ratepayers and stockholders alike, environmentalists joined with labor and civic groups to wring significant concessions out of the deal.
"We got several things out of this," says Mark Baker, executive director of Environment Colorado. "When you balance that against seven million tons of carbon emissions every single year, it's a difficult tradeoff."
The settlement that was reached is an example of how big power companies and environmental organizations can find common ground, Baker says. It also marks a milestone in what has been a gradual effort at détente between Xcel and some of its traditional opponents. A few years ago, he notes, "our relationships with Xcel could only be characterized as dismal. In 2001 they refused to do any kind of wind and had to be forced to do it by the PUC, only because it was far less expensive than natural-gas plants. They were pretty adamant about not cleaning up their coal plants without a guaranteed cost-recovery mechanism. Up until then, they lobbied against every single energy-efficiency and renewable-energy proposal. After the California energy crisis, and after they saw how their customers responded to wind, there was a growing realization that they could do some of the right things and make a buck out of it."
Under the agreement, Xcel will reduce overall sulfur dioxide emissions at the Comanche station by 11,000 tons a year, and nitrogen oxides by 2,300 tons. The company will develop up to 890 megawatts of renewable energy resources over the next eight years, nearly double what it's required to do under Amendment 37. It will add a nine-dollar-per-ton "carbon adder" cost to energy bids from sources that emit carbon dioxide -- a move that anticipates future regulatory costs of controlling the greenhouse gas and makes renewables more competitive in the bidding process. Xcel also agreed to use union labor for construction jobs, to sponsor public forums on sustainable development in Pueblo, and to pay for some other environmental cleanup projects in that city. Although not cheap, the package is expected to save the company money in some areas; even Xcel's own worst-case scenario projects that the deal will raise operational costs of the plant by only a few cents per megawatt-hour.
"It's a big deal for us," says Stutz. "It gives us a reliable source of generation. It may not have been what everybody wanted, but it was enough for them to agree to it."
One of the most impressive aspects of the settlement is Xcel's pledge to reduce electricity consumption over the next decade through efficiency programs, at a cost of $196 million. In Minnesota, Xcel has saved thousands of megawatts through what's known as demand-side management, or DSM -- working with businesses and consumers to install more efficient lighting and appliances, planning new development to take advantage of passive solar heating, and other conservation measures -- but its efforts in Colorado have been far more modest.
"Historically, the utilities in Colorado have had relatively weak energy-efficiency programs," says SWEEP's Geller, a leading figure in the energy-efficiency movement. "The PUC has not pushed the utilities to implement programs, nor given them financial incentives. There haven't been carrots or sticks, and that's usually what it takes."
The settlement calls for a whopping 800 gigawatt-hours (one gigawatt equals a million kilowatts) in electricity savings per year by 2014. "That's much more than they've ever done before," Geller says. "It's about half the level of savings we could get if we had state-of-the-art programs and a commitment like they have in Minnesota. We got half a loaf."
Given the reluctance of the PUC or state leaders to take any initiative on conservation issues -- Governor Bill Owens vetoed two energy-efficiency bills last spring -- the coal plant might end up doing more for renewable energy and DSM programs in the state than any bureaucrat. But several groups that signed off on the agreement acknowledge that they're still waiting to see if the ongoing dialogue with Xcel produces the results they hope for. The company is currently receiving "all-source" bids from independent power producers to meet an expected 2,500 megawatts of additional demand over the next decade. How much wind, gas and other fuels make the short list, expected to be announced in a few weeks, will reveal a great deal about Xcel's priorities.
"Looking back, if I had to do [the settlement] again right now, I feel I would," Baker says. "But that changes every day. Our thing was this would be the last coal plant. If there's coal in this all-source bid and it's accepted by Xcel, then we really look like a bunch of saps."
In June 2004, Leslie Glustrom filed a petition to intervene in the PUC hearings to be held on Xcel's coal-plant proposal. Glustrom had found out about the plant by reading the fine print in the fliers the company sent with its electric bill, and she was curious to see how the environmental community was going to respond.
"I wanted to watch the big guys fight this battle," she says. "I was going to sit in the back row and figure out how this worked."
Glustrom was no stranger to activism. She'd worked for years on efforts to protect the Prescott National Forest in Arizona from various mining, ranching and development threats, only to see half the ponderosa pines in the area wiped out in one year by drought and bark-beetle infestation -- events she's convinced had a great deal to do with man-made climate change. "Climate change," she says, "is something that drives me."
At the time she attended the first PUC hearing, Glustrom was considering giving up her job running a research lab at the University of Colorado to work full-time on global-warming issues. What happened in that room made her even more determined. "The room was filled with suits," she recalls. "The only other women were Xcel's attorney and one of the commissioners. I was sitting near the door. It was really intimidating, and I've been an activist for a long time."
Much to her dismay, PUC chairman Sopkin called her name shortly after the hearing began. He wanted to know if she was appearing simply as "a citizen of Boulder" or if she had some special interest in the case. Glustrom said she was there as a citizen of Colorado who was concerned about climate change and the costs of the new coal plant. Sopkin told her that the Office of Consumer Counsel is supposed to represent citizens' interests, and that "things like global-warming theory" were outside the scope of the PUC's expertise.
"I don't want to create an exercise in futility for you here to be involved in this case," Sopkin said.
"I'm very willing to take that -- what you might call 'exercise in futility,'" Glustrom replied. "To me, it's an exercise in citizenship."
Sopkin denied her petition to intervene in the case. She could attend the hearings, but she would not be allowed to speak.
"He made it clear he didn't want me in there," Glustrom says now. "After he denied my petition, three or four of the lawyers in the room handed me their cards. At the break, I was just swarmed with people telling me they couldn't believe he'd behaved so badly."
Later, after some research on the relevant statutes, Glustrom decided that Sopkin's claim that she lacked standing to intervene was erroneous. But her efforts to appeal that ruling proved unsuccessful. So instead, she sat on the sidelines and watched the regulatory process take its course. The process, she says, was skewed in favor of Xcel and its coal plant from the start -- to the point that many of the state's own rules were bent or simply ignored.
The plant is one component in Xcel's latest "least-cost resource plan" -- which, under PUC rules, is supposed to develop power sources at the least cost to customers and give priority to clean-energy technologies. Glustrom claims that the company's calculations undervalued the potential contribution of wind, solar and energy-efficiency measures to the total package; for example, the plan estimates that wind stations produce power only 10 percent of the time, when a 30 percent rating is more accurate. Using Xcel's own data, Glustrom found that the "savings" to customers gained by building the plant could be more than matched by aggressive investment in wind and energy-efficiency programs.
"The so-called savings from building the plant is a few percent, at most, of the billions that will be spent to operate it," she says. "And if they delay it a few years, it will wipe out the savings. They made a decision to build a coal plant first, then shuffled around the numbers to make it work."
The proposal was also based on some dubious projections about the price of coal over the next few decades. One Xcel official testified that the economic modeling for the plant looked at a range of natural-gas prices but only a "base" coal price, with allowances for inflation. But the actual price of Powder River Basin coal has doubled in recent months, from around six dollars a short ton last January to more than twelve dollars the week of October 12, defying the notion that coal is an economically stable fuel. Since the new Comanche unit would use up to 3.9 million tons of coal a year, even a five-dollar jump in the cost per ton would hike the operating cost of the plant over its fifty-year lifespan by close to a billion dollars.
"They're assuming that, for the next thirty years, the price of Powder River Basin Coal will stay completely flat, at around six dollars a ton," Glustrom says. "Any economist will tell you that's a questionable assumption."
The price of coal remains less volatile than that of natural gas, despite occasional spikes, Stutz responds. As for the 10 percent figure the company used for power generation from wind, he says that conservative estimate forces Xcel to add more turbines to achieve the wind-power goals required by Amendment 37 and the settlement agreement.
If the plant costs more to build or operate than projected, those cost increases will end up being passed along to customers. In fact, Xcel got permission from the PUC to begin recovering plant construction costs through additional charges to energy bills starting in 2007, although the plant might not be operating until around 2010. "The PUC has allowed Xcel to do what the least-cost plan rules were intended to avoid -- shift risks to ratepayers instead of generators," Glustrom contends. "In this plan, the stockholders take no risk."
Glustrom's economic arguments failed to dissuade the PUC, or even convince the agency that she had a right to object. But she soon became even more disillusioned with the state health officials who granted air permits for the new unit, even though their federal counterparts claimed the plant was already releasing "massive amounts of illegal emissions."
In early 2002 the EPA had issued notices of violation to Xcel for emissions from Comanche and its Pawnee coal-fired plant near Brush. The notices were part of a long-running battle between the agency and power companies over whether, under the 1990 Clean Air Act, modifications in older plants require new pollution controls or are simply "routine maintenance," as the plant owners contend.
"The plants were already in full compliance with the Clean Air Act, in our opinion," says Stutz. "We've remained in compliance. The general public thinks that once you're put on notice, you're guilty until proven innocent. It's been a major bone of contention with us. There were fifty power plants around the nation that were put on this, but nothing's been done since."
Nothing's been done, Glustrom counters, because of political interference. "The Bush administration basically rolled out the red carpet for coal plants," she says.
Under state law, the Colorado Department of Public Health and Environment is supposed to investigate "written and verified" complaints of air-quality violations. The EPA notified the CDPHE of its findings regarding the Comanche and Pawnee plants, but the state agency failed to conduct any kind of investigation. In its responses to public comments on the permit, the CDPHE took the position that it had "broad discretion" whether to investigate possible air-pollution violations, and that doing so in this case would be a waste of time and money, since Xcel was going to clean up the units as part of the new construction.
Dave Ouimette, an official in the department's air-quality-control division, says the EPA notices had no bearing on the state's handling of the permitting process for the new Comanche unit. "[The notices] weren't issued by us, and the EPA didn't take any further action," he notes. "So we felt it was quite legitimate to move ahead with the permits as we did."
Updating the pollution controls at the existing Comanche units will result in a net reduction of sulfur and nitrogen emissions at the plant, even with the additional emissions from the new unit. Xcel got "credit" for that reduction in the permit process, despite state and federal regulations that prohibit issuing such credits for emission reductions that merely meet current compliance levels. Citing the current litigation, Ouimette declined to comment on that point.
Glustrom and Barber watched and waited as Xcel's proposal made slow but remarkably smooth progress through the maze of PUC and state health department regulations. They watched as the environmental objectors signed the settlement and stopped objecting. They watched as the National Park Service, which in the past has routinely opposed new power plants that decrease visibility at national parks and monuments, chose not to intervene in this case -- despite NPS modeling of air emissions that indicate significant impact from the Comanche plant on haze at the Great Sand Dunes and Rocky Mountain National Park.
They watched and waited. Then this past summer, they decided to sue the state. "It appears to me there's selective enforcement going on," says Barber. "We're trying to send a message to regulators that they need to respect the process of law, even if someone's in office who doesn't like that process."
From her kitchen window, Helen Quintana can see the twin stacks of the Comanche station rising from the rolling prairie at the southeastern edge of Pueblo. A white plume of steam hovers over the plant like an errant cloud.
Within a short drive of the plant is a patchwork of wildly different neighborhoods -- farmland and new housing developments, an industrial zone that stretches to the old steel mill, cluttered trailer parks, stately cemeteries and modest, semi rural homes, some with yards big enough for horses, flanked by towering cottonwoods. Unlike Globeville or other industrial areas along the Front Range, this part of Pueblo doesn't fit the stereotypical notions of an "environmental justice" community, but locals say it's the place where heavy industry comes to do its dirty work. The area has been targeted for a new cement plant as well as a new boiler at Comanche.
Quintana has lived on LaSalle Road most of her life. She can remember when the road was gravel and it was unusual to see more than ten cars pass in a day; a local rancher drove cattle by her house to the stockyards. Now LaSalle is one of the busiest surface streets in the county, and Quintana dreads the clamor that construction of the new Comanche unit will bring.
"I'm tired of fighting the pollution," she says. "I cannot see the point of building a plant that is going to become obsolete."
At public meetings, she's complained to Xcel officials about mounds of coal dust sitting on the grounds of the power plant, but she says she's more concerned about the invisible pollution that the plant generates. Florencio Quintana, her husband of fifty years, died in 2003 of multiple myeloma, a blood disease that's been associated with both genetic and environmental factors.
"I can't prove anything about what caused it," she says. "But like I told the people at the last meeting, this electricity is going up north. The cement is going up north. Why do they pick Pueblo for the polluted industries? Because they can."
CCAWP's Barber notes that Pueblo already produces more than 80 percent of the state's mercury emissions. Comanche's new unit will increase the amount of mercury by around 125 pounds a year; the cement plant, if it proceeds, will add another 25 pounds. "Mercury is a major concern, but all the other pollutants are, too," she says.
The new unit will also make huge demands on the city's water -- five million gallons a day. Xcel convinced city leaders to annex the plant, giving their boilers access to the municipal water supply on an equal priority with residential customers. "Comanche was using a third of Pueblo's water," Barber says. "Now it will be using half -- as much as the rest of the whole town."
A slick brochure touts Xcel's water-conservation strategies, including its use of recycled water at its Cherokee station and an "innovative low-water-use cooling system" that will cut water use in half at Comanche. The company has "done better than some" at staging public forums about water and pollution issues but hasn't been terribly responsive to her group's concerns, Barber says: "We were allowed to ask questions, but I didn't get answers."
Still, regulators and government officials, rather than Xcel, have been the greatest source of frustration for the plant's opponents. "I talked to this guy from the EPA, and he said, ŒWell, you've got to do something at the grassroots level,'" says Quintana. "And I said, ŒNo, it's you guys that have to start doing something.' People need to start getting smart about alternative energy."
Xcel has long recognized the need to develop cost-effective power from innovative sources, Stutz says. The company estimates it will need to have 18 megawatts of solar power in place in two years to meet the mandates of Amendment 37, and the Comanche settlement places an even greater priority on the acquisition of more wind power and other renewables.
The company is also studying the feasibility of a "clean coal" plant in Colorado. There are already two plants in the country that use IGCC -- short for integrated gasification combined cycle -- technology to convert coal into a gas to make electricity, reducing emissions and making it easier to store the troublesome carbon dioxide. But the technology might still be too costly for use with western coal. While experts dicker over the commercial viability of alternatives, the power industry continues to bank heavily on what it knows, and that's conventional coal plants. Meanwhile, carbon dioxide emissions, and all the attendant long-term costs they might entail, keep rising.
Environmentalists are often scorned as standing in the way of progress, but rapid advancement on the energy front can't come soon enough to suit Leslie Glustrom.
"I don't want to turn anyone's lights off," she says. "I just want to run 'em with that big ball in the sky."