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Colorado Law Could Save Ratepayers Billions in Closing Legacy Plants as they Transition to Renewables

Key Takeaways:

  • Ratepayers would save $1.7 billion if Colorado closes 10 coal plants early
  • Savings increase to $18 billion when factoring a potential cost of carbon
  • Securitization law lets utilities refinance debt on existing coal plants while transitioning to renewables

When it comes to weighing the costs and benefits of renewable energy versus fossil fuels, there’s traditionally been no shortage of debate. This is certainly the case in the discussion happening right now in Colorado, where opposing sides are at odds about the true cost savings of closing legacy coal plants early.  The truth is somewhere in the middle of the extreme positions of the argument.

At stake is a new report published by the Sierra Club, called the “Colorado Coal Plant Valuation Study,” which shows that the state would save a whopping $1.7 billion if it closes down 10 coal plants ahead of their scheduled closure in 2025 and replaced them with wind (or $1.4 billion if replaced with solar). The report goes on to assert that ratepayers could save even more if utilities put into use a new financing mechanism approved by state legislators known as securitization: this would allow utilities to refinance their debt on the early retired coal plants.

Customers of Xcel Energy—which has committed to reducing its GHGs by 80% from 2005 levels by 2030—would save close to half a billion dollars over 20 years through this method.  Factoring in a potential cost of carbon around $46 per ton, statewide ratepayer savings could vastly increase to around $18 billion.

The Balancing Act of a Transition to Renewables

Colorado’s balancing act relies on a transition to renewables and other technologies, that don’t include coal, while finding ways to pay off debt costs on existing coal plants. So, on the other side of the argument are organizations such as the Institute for Energy Economics and Financial Analysis (IEEFA). Instead, the IEEFA has come forward to warn ratepayers that allowing utilities to refinance debt on soon-to- be-closed plants would tie up electricity customers’ dollars for decades (and leaving utilities stranded with “economically worthless assets”) because there’s no actual limit on how much debt can be covered through securitization.

While it is true that the Colorado securitization law doesn’t define a timeline, nor is there a guarantee of speeding up closures to Colorado’s 10 remaining coal plants, this law does represent a creative start to solving a complex problem. Such creativity is enhanced by the fact that the law is seeking to ensure ratepayers in Colorado see the financial benefits of transitioning to 100% renewables.

 

What We’re Reading : Extract from, “Law Aimed At Speeding Up Coal-Plant Closures Cast as Both Boon, Danger to Colorado Ratepayers,” published by The Denver Post

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