October 2, 2018 Read More →

Colorado legislator to offer plan enabling early coal plant retirements

Energy News Network:

A Colorado state legislator says he will introduce a bill in January that would give utilities a tool to accelerate retirement of power plants increasingly unable to compete with cheaper technology.

The plan, known as securitization, “could deliver mass savings across Colorado,” says State Rep. Chris Hansen, a Democrat from Denver. The proposal will also include provisions intended to help communities and workers impacted by the transition from coal-fired power to renewables and natural gas.

Securitization of utility assets is like refinancing a home to take advantage of lower interest rates. In this case, however, utilities would be permitted to issue ratepayer-backed bonds to enable utilities to close down stranded coal plants before they have been fully depreciated. Ratepayer-backed bonds commonly come at interest rates of 3 percent, compared to 7 percent interest charged for conventional power plant financing.

Twenty states already permit securitization of utility assets. In Florida, Duke Energy used securitization to finance $1.3 billion in assets of the Crystal River nuclear plant that closed in 2013 because of structural problems. The restructured financing saves customers $700 million over 20 years. In Michigan, Consumers Energy Co. used securitization to realize the unrecovered book value of several coal-fired and three gas-fueled electric generating units designated for early retirement due to changes in environmental regulations.

In Colorado, Hansen sees securitization as a tool available to utilities to speed their transitions to cheaper renewables and natural gas. The rapidly shifting economics are evident in plans by Xcel Energy—approved by the Colorado Public Utilities Commission in early September—to close two coal-fired power plants at Pueblo about a decade early.

Even with aging power plants, utilities usually have depreciation remaining to be realized. In other words, like a long-term housing mortgage, they still owe money. In the case of Xcel’s two aging coal plants at Pueblo, Comanche I and II, the company dipped into a fund created in 2004, when state voters approved the first renewable energy standard for investor-owned utilities. Those utilities were permitted to tack up to 2 percent onto ratepayer bills to be able to deliver the required renewables. In replacing the generation of Comanche I and II with primarily wind and solar and a dash of natural gas, however, Xcel will deplete the Renewable Energy Standard Adjustment, or RESA, fund.

More: How refinancing could help retire Colorado coal plants sooner

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