Blowing Smoke

Public Service Company of Colorado wants state lawmakers to approve its self-styled proposal for cleaning up Denver's air. But the $200 million-plus plan may make consumers gag.

Though it's been wrapped in a green bow for legislators--several environmental groups have even given it their blessing--the bill violates Public Service's recent promise not to seek a new rate hike for five years. What's more, it would stick ratepayers with the full cost of installing anti-pollution "scrubbers" on three coal-fired power plants in the metro area while letting company shareholders reap any profits that may result from the upgrade.

"Public Service has done a masterful job of greenwashing this," says Nick Johnson of the Colorado Public Interest Research Group, which is opposing Senate Bill 142. "Unfortunately, I don't think the environmental groups are looking at the whole picture."

CoPIRG normally works alongside such organizations as the Sierra Club and the Environmental Defense Fund. But the groups have split ranks over the new bill. "We love the air-quality improvements," says Chuck Malick, also of CoPIRG, "and we hate how consumers are supposed to pay for 100 percent of it."

Under the utility's plan, customers would cover the cost of reducing sulfur dioxide and nitrogen oxide emissions from the plants. According to Public Service lobbyist Jim Wexels, the charge doesn't technically qualify as a rate hike, because the money would go to pay for capital construction, not to cover the cost of generating electricity. However, Wexels concedes that the distinction may be lost on customers who get higher bills.

Public Service estimates the cost of adding the scrubbers at $211 million, but CoPIRG says it could be higher. Both sides agree that the cost to an average residential customer would likely be somewhere between $8 and $12 per year.

By going straight to the legislature, Public Service is effectively snubbing the Public Utilities Commission, the state body specifically set up to rule on rate hikes and other business conducted by monopoly utilities like PSC. That's because the company knows its proposal would likely get a frosty reception from the PUC. After all, Public Service promised the PUC in 1996 that it wouldn't raise its electric rates for five years. That pledge came in exchange for approval of its merger with Southwestern Public Service of Amarillo, Texas.

So why would Public Service risk being accused of going back on its word? According to spokesman Mark Severts, opinion polls conducted by the company show that consumers are willing to pay more if they know the money is going toward reducing pollution. "This is good for the community, and we think the community ought to be willing to pay the costs of it," Severts says.

Willing or not, the community won't have a choice if the legislature passes the plan and Governor Roy Romer signs it. And according to Ken Reif, director of the state Office of Consumer Counsel, PSC has a lot more on its mind than reducing emissions. Reif says the bill will do as much to polish the utility's bottom line as it will to scrub the brown cloud.

"It's hard to be against clean air," notes Reif, whose agency is opposing the bill. "But in a deregulated world, this clearly gives Public Service a huge advantage."

Lawmakers are now considering a proposal to deregulate electric and gas utilities in Colorado. And should that measure pass, PSC's clean-air campaign will take on a whole new meaning. That's because under SB 142, companies who might enter the market to compete against Public Service would be forced to tack the scrubber surcharge onto their bills--even if they were generating their power from clean-burning natural gas or solar panels.

"This will give Public Service a huge competitive advantage over everyone else," says Jim Ives, a lobbyist for the Rocky Mountain Oil and Gas Association, which represents natural-gas suppliers who would like to get into the retail power business.

Even environmental supporters of PSC's plan, such as Bill Myers, vice chairman of the local chapter of the Sierra Club, say deregulation is the carrot that's helped Public Service become more interested in helping the environment. "They could have done all this stuff ten years ago, but they didn't," says Myers. "But now deregulation is coming, and they are looking up and doing all of this green stuff."

Myers also says that while he thinks the proposed bill is a good idea, he wishes Public Service would try to wean itself from burning coal altogether rather than continue to invest in coal-fired plants. "We would like to see them pushed toward more renewable sources of energy," Myers says.

But the bill is actually designed to decrease the pressure on Public Service to explore alternative forms of energy. In fact, the bill's lead sponsor, Republican senator Dave Wattenberg of Walden, says that's one of the main reasons he's supporting it. By making coal a more palatable choice both economically and environmentally, says Wattenberg, the legislation will help the coal mines in his district keep operating.

To help smooth the way, the bill also contains a provision exempting Public Service from a state law that says utility rate hikes must be subjected to a formal study of their costs or benefits to consumers. Critics say PSC wants the scrubber fees to go into effect without such an analysis because the study might conclude that it would be more efficient for consumers to have Public Service switch from coal to other forms of energy.

Environmentalists like Bruce Driver, a lawyer for the Land and Water Fund of the Rockies, say that what matters most is that the bill would clean the air in metro Denver. Driver says sulfur dioxide emissions would drop by about 70 percent, or about 18,000 tons each year. "We don't want an economic analysis to stop this thing," he adds.

Because those reductions would be greater than what's now required by the state, the bill also precludes the state from issuing any new air-quality regulations affecting the coal plants for the next fifteen years. "Public Service is proposing going well in front of where the law is now, so we want some assurances that the state won't change the rules midstream," explains Severts.

CoPIRG's Johnson says the fifteen-year ban on new environmental rules wouldn't be so bad if the company itself was taking the risk on installing the scrubbing equipment. But, he asks, "why should we grant them a fifteen-year exemption for something they didn't pay for in the first place?"

Johnson adds that because the installation of the scrubbers would make PSC's power plants much more valuable, people who own Public Service stock should share the burden. An equitable solution, he says, would be to let the Public Utilities Commission decide how much of the cost should be borne by consumers and how much by the shareholders. That's what the PUC does when Public Service proposes traditional rate hikes. "We feel much more comfortable having the PUC decide it," Johnson says.

However, citing Public Service's belief that the proposed fees don't legally qualify as a rate hike, lobbyist Wexels says the PUC doesn't need to get involved. Adds Wexels, "This is not a windfall for Public Service."

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Scott C. Yates

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