Colorado Regulators Approve Xcel Energy’s Market Participation Plan
The Colorado Public Utilities Commission (PUC) has approved a controversial plan by Xcel Energy to join the Southwest Power Pool’s Markets+, despite significant concerns regarding costs. The decision, reached on October 18, 2023, allows Xcel to participate in a new wholesale electricity marketplace, enabling the utility to purchase power a day in advance. This initiative aims to enhance the efficiency of electricity distribution while supporting state requirements to transition to a more organized wholesale market by 2030.
During a hearing, two of the three PUC members expressed their support for Xcel’s application. The new marketplace is designed to facilitate coordination among participating utilities and increase the integration of renewable energy sources, crucial for minimizing greenhouse gas emissions. Xcel’s involvement is viewed as a preliminary step towards fulfilling Colorado’s legislative mandate for all transmission utilities to adopt organized wholesale market practices.
Nevertheless, dissenting voices within the commission raised serious cost-related issues. Commissioner Megan Gilman argued that Xcel failed to demonstrate that the benefits of joining the Markets+ outweighed the associated costs, asserting that the utility’s participation could potentially delay its transition to a fully organized market.
The PUC’s staff echoed these concerns, suggesting that Xcel’s application did not sufficiently prove that joining the marketplace would serve the public interest. They emphasized that without clear evidence of net benefits, the commission should consider denying the application.
Xcel Energy, Colorado’s largest electricity provider, has outlined substantial costs associated with joining the Markets+. These include an initial investment of approximately $2 million for the first phase, followed by annual operational expenses projected at $14 million for the first five years, decreasing to $10 million thereafter. Additionally, the company anticipates integration costs ranging from $13 million to $15 million.
A report from Western Resource Advocates indicated that Xcel’s projected costs could exceed net benefits by $30 million through 2032. For customers to see any financial benefits, Xcel would need to maintain its participation in the Markets+ until 2038, effectively delaying its commitment to a more centralized market by nine years.
This situation has prompted a response from industry advocates. Brian Turner, regulatory director at Advanced Energy United, criticized the commission’s decision, asserting that it does not align with the best interests of ratepayers or Colorado’s clean energy goals. He indicated that the utility should instead consider joining the Extended Day-Ahead Market (EDAM), managed by the California Independent System Operator, which has been shown to offer better financial outcomes, potentially saving Xcel an average of $13.2 million annually.
Despite these recommendations, PUC Chairman Eric Blank maintained that the long-term savings anticipated from joining the market justify the upfront costs. He asserted that the potential for significant annual savings warrants giving the plan a chance, despite the initial financial losses.
As the debate continues, the PUC plans to monitor Xcel’s participation closely, focusing on cost management, market reliability, and emissions reduction. The decision reflects broader regional trends, with approximately 60% of the United States’ electric power supply currently managed by regional organizations, predominantly in the eastern states.
Looking ahead, the path for Xcel Energy remains uncertain. With further regulatory scrutiny and competing market options, the utility faces critical decisions that will impact both its financial health and the broader goals of energy sustainability in Colorado.
