A relatively small residential Xcel Energy natural gas project in the Sloan Lake area sparked a major debate at the Colorado Public Utilities Commission about the state’s energy future and its goal of reducing greenhouse gas emissions.
Environmentalists, consumer advocates and commission staff opposed the $32 million plan, arguing that it was “at odds” with Denver and the state’s policies to reduce greenhouse gas emissions and move to cleaner energy.
Xcel Energy’s Colorado subsidiary, Public Service Company of Colorado, and suburban officials said the upgrades to the natural gas supply system were necessary to ensure reliability and allow for growth.
The committee approved the West Metro Gas Project on Wednesday, but not without some frustration and self-examination.
“We are on a tightrope and moving full steam ahead on an energy transition,” Commissioner Megan Gilman said at an earlier hearing on the project. “It’s hard to transfer this energy system that people depend on every day.”
The project is expected to serve 6,800 customers in the Sloan Lake area of Denver, Edgewater and Lakewood, adding a new control station and 18,000 feet of new piping.
“Current gas infrastructure is simply not sufficient to serve customers now — and especially will not be able to support the growth of an area with many affordable housing options,” Lakewood Mayor Adam Paul said in a filing.
However, detractors argued that Xcel Energy was not sufficiently looking at alternatives, such as injecting compressed natural gas into the system when demand was high or using demand-side management programs to help customers mitigate peak demand.
The Colorado office of the Utility Consumer Advocate, committee staff, and the nonprofit Southwest Energy Efficiency Project known as SWEEP attempted to block the project.
“The company hasn’t had enough time to look at alternatives,” Justin Brant, program director for SWEEP, said in an interview. “We have to look at these projects long-term because these are long-term assets.”
The risk is that the useful life of the investment is shortened — much like coal-fired power plants are shutting down early — leaving a “stranded asset” that someone has to pay for, Brant said.
“The company bears some responsibility for these choices,” Gilman said. “It seems unfair that all the uncertainty comes on taxpayers’ backs with a guaranteed recovery.”
The project also violates Denver’s plans to reduce natural gas consumption, the state law that aims to reduce greenhouse gas emissions by 50% from 2005 levels by 2030, and Senate Bill 264, which requires natural gas companies to reduce emissions, Gene Camp, deputy director of PUC, said in testimony.
“The impact of ongoing investments in the public service gas system will continue well into the future, in both monetary and emissions contexts. This pattern cannot continue,” Camp said.
Natural gas companies are required to submit “Clean Heat Plans” next year showing how they will achieve a 4% reduction in emissions from 2015 levels by 2025 and a 22% reduction by 2030.
“We have our plans for clean heat in the next few years and that’s where the rubber will meet the road,” said Commissioner John Gavan.
The commission is also updating its natural gas planning rules, but in this case, Xcel Energy had proven the need for the project, Gavan said.
“If we were two years down the line it might be a different point of decision, but where we are now we are faced with an obligation to serve,” he said.
Brooke Trammell, a director of Xcel Energy, said in testimony that the company can move forward with the West Metro project while also allowing its local distribution company, or LDC, to meet its obligation under Senate Bill 264.
“A reasonable path forward lies with a portfolio of emission reduction strategies, including dual-fuel heating systems, supply-side options and other measures,” said Trammell. “These measures will ensure that emissions from our LDC system are reduced over time to meet the targets.”
Still, the commissioners said they were concerned about the lack of alternatives and the cost of the project.
“I would like to see stronger alternatives than what we’ve seen in this case,” said committee chair Eric Blank, adding that the committee should issue a finding “to express our disappointment and notify the company.”
The balance of costs relative to the number of customers served was another bone of contention for the committee.
“Is the growth paid?” Gilman said. “This is kind of a good example of looking at a project for a fairly limited number of customers, which isn’t going to be supported by any projections to increase sales.”
Blank estimated that at $32 million, the project was equivalent to a $4,500 to $5,000 grant for each Sloan Lake customer, paid for by the rest of Xcel Energy’s customers.
“It seems that the company has a single solution for every safety and reliability problem, which is to spend money and put it into the rate base, thereby socializing costs,” Blank said.