As this newsletter goes to print, the Colorado Public Utilities Commission will have just concluded a further evidentiary hearing in the matter of the Application of Public Service Company of Colorado for approval of its 2021 electric resource plan and clean energy plan in proceeding No. 21A-0141E. The Application was filed on March 31, 2021, and is Colorado’s first clean energy plan proceeding under Senate Bill 19-236. The Senate Bill required Public Service to include in its next electric resource plan (i.e., its 2021 plan) a clean energy plan to reduce its carbon dioxide emissions associated with electricity sales by 80% (from 2005 levels) by 2030 and to seek to achieve providing customers with energy generated from 100% clean energy resources by 2050.
The clean energy plan was required to include a resource acquisition period extending through 2030 and to set forth a plan of actions and investments by Public Service projected to achieve compliance with the 80% requirement and 100% goal. If the clean energy plan included accelerated retirement of existing facilities, it also had to include a workforce transition plan and a community assistance plan to address the local jobs and property tax impacts of the plan.
The application included eight portfolios of wind, solar, and dispatchable generation resources that met or exceeded the 80% requirement but with different cost impacts. The term “dispatchable” means a resource that Public Service can ramp up and down to meet operating conditions (with quick start capability of 10 minutes or less and capability to be remotely started by Public Service at any time). The dispatchable resources that are expected to be acquired are natural gas-fired electric generating resources and battery storage.
The eight portfolios varied depending upon the actions Public Service took with regard to its Pawnee and Comanche 3 coal-fired power plants. The range of actions included converting to natural gas, early retirement in various years, or business as usual. All other existing Public Service coal-fired power plants are proposed for early retirement prior to 2030 to help achieve the greenhouse gas reduction requirement of the statute.
Public Service’s preferred portfolio was number 7, which involved converting the Pawnee power plant to natural gas in 2027 and retiring the Comanche 3 coal power plant early (in 2039) but reducing its operations to 30% starting in 2030. As a result of these actions and Public Service’s estimate of its resulting resource needs, the preferred plan proposed the following acquisitions during the resource acquisition period:
- 2,300 MW of wind
- 1,800 MW of large-scale solar
- 400 MW of battery storage
- 1,300 MW of flexible dispatchable generation (this is 100 MW less than Public Service has today)
All eight portfolios were based upon generic modeling results. Following the Commission’s final decision in the pending proceeding, there will be a Phase II all-source competitive solicitation which can change the type and amounts of additional resources that are added.
Following interventions, discovery, and several rounds of filing of testimony by the parties, the application was scheduled to proceed to hearing. But Public Service and the parties were also engaged in confidential settlement negotiations to see if they could settle some of the key issues that had been identified in the proceeding. On November 24, 2021, a Joint Motion was filed requesting approval of a Non-Unanimous Partial Settlement Agreement. The Agreement addressed major issues in the proceeding including moving up the retirement date for Comanche 3 by five years (to the end of 2034), providing for a just transitions plan to address the loss of jobs and tax impacts of the early retirement on the Pueblo community in which Comanche 3 is located, and numerous other issues. The Settlement Agreement was a modification to the Application (including Public Service’s preferred portfolio 7) as to the issues addressed in the Settlement Agreement. Oppositions to the Agreement were also filed.
An evidentiary hearing was held during the first two weeks of December and then the evidentiary record was closed. (Public comments have been filed throughout the proceeding and continued to be filed with the Commission.) The parties filed Statements of Position in January of this year and then the application was ready for Commission decision. The Commission held its first deliberations meeting on March 14, 2022, at which the Commissioners discussed but did not decide several of the major issues in the proceeding.
Following the initial meeting, the Settling and Non-Settling Parties convened discussions regarding potential resolution of key items in a manner response to the Commission discussions on March 14, 2022. The objective of these further discussions was to resolve items and avoid the potential for a protracted reconsideration, reargument, or rehearing process that could further delay the commencement of the Phase II competitive solicitation. Avoiding such delay is critical so that bidders can qualify for available tax credits for their projects. The result of these further discussions was the filing on April 26, 2022, of an Updated Non-Unanimous Partial Settlement Agreement. This Updated Settlement Agreement was the subject of the further evidentiary hearing, which was held on May 17, 2022.
The current proposal, as presented in the Updated Settlement Agreement, includes the following terms:
- Retirement date for the Comanche 3 coal plant. Moves the retirement date for Comanche 3 from no later than December 31, 2034, to no later than January 1, 2031. Provides for reduction targets in operation of Comanche 3 by increasing amounts through 2029.
- Pawnee coal plant. Provides for conversion of Pawnee to natural gas no later than January 1, 2026.
- Other coal plants. Provides for retirement of Hayden 2 in 2027, Hayden 1 in 2028, and Craig 2 in 2028.
- Just Transition Plan for Pueblo County – Location of Comanche 3. Proposes that:
- Public Service will continue to make payments to Pueblo County annually from 2031 through 2040 (and allocated by the treasurer’s office accordingly) in the amount of the projected lost property tax revenues for those years, unless offset by property tax revenues from generation or transmission infrastructure sited at Comanche Station or within Pueblo County.
- A separate Comanche 3 Just Transition Plan to be filed with the Commission no later than June 1, 2024. Through its Just Transition Plan filing for Comanche 3, the Company will conduct a standalone Just Transition Plan competitive solicitation for the replacement of the energy and capacity associated with Comanche 3. This process will occur on a standalone basis in an effort to ensure the Pueblo community and benefits to the community are the focus of the replacement portfolio, simultaneously seeking just transition benefits and the procurement of innovative technologies to help the Company progress towards a carbon-free future.
- Public Service will own, at a minimum, $690 million in capital investment or 500 MW of accredited capacity, whichever is triggered first, for resources necessary to replace the accredited capacity of Comanche 3, provided that a showing of resource need is made in the first phase of the Comanche 3 Just Transition Plan filing and any final approved plan in the second phase must be deemed a cost-effective resource plan consistent with Rule 3601 and Rule 3617 after a full consideration of the just transition and emissions reduction benefits of the plan.
- The Just Transition Plan solicitation will also utilize a utility ownership target of 50 percent for energy and capacity acquired that is in excess of the $690 million investment or 500 MW accredited capacity minimum, and provided that the final approved resource plan is cost-effective as set forth above.
- Provides for a process where generic resources will fill the Company’s Phase II resource needs in 2029 and 2030 while having the 2029 and 2030 resource needs filled through the Pueblo Just Transition Plan solicitation as opposed to this 2021 ERP & CEP.
- Next electric resource plan. Establishes that the Company will file its next Electric Resource Plan no later than October 31, 2026.
Modeling results (based upon generic resources) indicate that the Updated Settlement Agreement will reduce carbon emission from 2005 levels by 85% by 2030 and by 99% by 2050.
The modeling also shows the following resource acquisitions through 2030:
But, as noted above, the resource needs in 2029 and 2030 will not be filled through the upcoming Phase II competitive solicitation. Generic resources will be used for 2029 and 2030 in the modeling of the Phase II bids. The 2029 and 2030 resource needs will be filled through the Pueblo Just Transition Plan competitive solicitation.
The next step in the proceeding is for the Commission to deliberate in one or more open meetings, which can be viewed through the Commission’s webcast. Go to: https://puc.colorado.gov/webcasts The Commission will be deliberating regarding the proposed Modified Settlement Agreement and all issues raised in the proceeding that were not included in the Modified Settlement Agreement. (A list of the unsettled issue was filed with the Commission following the May 17, 2022, hearing.) Once the Commission has deliberated on and decided all issues, an initial written decision will be written and signed by the Commissioners. Parties in the proceeding will then have 20 days after the mailing date of the Commission decision (as printed on page one of the Decision) within which to request rehearing, reargument, or reconsideration (“RRR”). If no requests for RRR are filed within the 20-day time period, then the Commission’s decision becomes the final decision of the Commission. If the Commission does not act upon an application for RRR within 30 days of its filing, the application is denied and the Commission’s initial decision is final. If one or more requests for RRR are filed and the Commission elects to act on them, then the initial decision, as modified by the Commission’s decision on RRR, becomes the final decision of the Commission. See Commission Rule 1506. A Final Commission Decision may be appealed to state district court. § 40-6-115, C.R.S.
Once there is a final Commission Decision, the next step will be for Public Service to make any modifications required by the Commission’s Decision and get set up to conduct an all source competitive solicitation to fill the resource need approved in the Commission’s Decision. Once the request for proposals (“RFP”) is issued, bidders will have 90 days within which to submit their bids in accordance with the detailed instructions in the RFP bid package.
A Commission initial Decision is expected in early summer.