Xcel Energy's Green Advocacy Backfires, Beautifully

The chickens of utility Greenplating come home to roost

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In a startling report submitted to the Colorado Public Utilities Commission, Xcel Energy admitted that it will likely be in a “capacity deficit”—which is a nice way of saying its system does not meet its reliability requirements—from now until at least 2028, unless it keeps its Colorado coal plants open.

One almost feels bad for the predicament the company finds itself in, and we may even have a brief glimmer of admiration for its willingness to bluntly highlight the issue, but then we remember:

• In 2018, Xcel became the first investor-owned utility to declare its self-imposed environmental, social, governance (ESG) goal of making its system carbon-free by 2050;

• It has a history of giving thousands of dollars to climate groups like Fresh Energy in Minnesota and Western Resource Advocates in Colorado, and working with them to push for the closure of its coal plants and decarbonization mandates, and;

• Xcel lobbied in favor of the carbon-free electricity mandates passed in Minnesota and Colorado.

Furthermore, when we look at Xcel’s most recent investor presentation, we see that the company is practically giddy about all the ratepayer money it will spend on wind, solar, and batteries, which will increase its rate base and, in turn, its corporate profits.

In short, Xcel Energy is not a victim, nor is it brave for finally bringing attention to the need to maintain our existing generating resources—a reality that we, along with the Independence Institute, have been highlighting for nearly a decade. In short, Xcel is simply reaping the entirely foreseeable consequences of its own self-serving actions.

Let’s look at the reliability hole Xcel currently finds itself in, and disassemble Xcel’s lip service to reliability and affordability in its most recent investor presentation with a focus on the Centennial State.

The Comanche Report

On March 2, Xcel Energy filed “The Comanche Report” with the Colorado Public Utilities Commission (PUC), where the company highlighted the severe resource adequacy deficit it currently finds itself in and the need to delay planned retirements for its coal units.

Specifically, Xcel noted the following:

[T]he Company’s near-term (i.e., 2026 and 2027) resource adequacy position is negative, 2028 is challenged, and these years present significant operational challenges even with Comanche 2 extended through the end of 2026. This report will discuss the limited incremental options for adding capacity resources that are needed. When the June Application is filed, swift action will be needed to shore up power needs for our customers in the near and intermediate terms. Difficult decisions about extending baseload units may be needed and additive transmission needs are likely part of solutioning these issues, as reliability of the system—in addition to the safety and affordability of such—remain the paramount goals of the Company and should be for Colorado as well.

Further into the report, it states that, “Near-term, the most likely capacity solutions are continued extensions of existing units—namely, Comanche Unit 2 and, to a lesser extent, the Hayden units.” Additionally, regarding repairing and restarting Comanche Unit 3, Xcel found “that the incremental cost to replacing Comanche Unit 3 would be magnitudes more expensive for customers than” restarting the facility, and that “there are no reasonable alternatives to returning Comanche Unit 3 to service.”

While this is true, it’s also true that accelerating the retirement date of Comanche Unit 3 from 2040 to 2030 is also more expensive for Colorado ratepayers, as we highlighted in our 2023 report in Colorado:

The accelerated retirement of Comanche 3–from 2040 to 2030–increased the cost of the Polis Plan by $8 billion alone, as the retired coal capacity needs to be replaced with wind, solar, and battery storage 10 years earlier than originally planned. The cost increase occurs because it accelerates the timeline in which investments must be made to replace the plant, which earn a rate of return for the utility paid for by ratepayers.

Xcel advocating to keep coal plants online may seem shocking to those who know about Xcel’s “Steel for Fuel” initiative, which is the company’s motto for the strategy of building more fixed-cost generators like wind and solar (steel) to replace and displace thermal resources like coal and natural gas. The “Steel for Fuel” initiative was described in a 2017 Utility Dive article:

Xcel calls it “steel for fuel” — swapping out fossil generation for fuel-free wind and solar. At today’s prices, “everybody benefits,” Fowke said. Consumers get lower-cost energy and Xcel can earn a rate of return for building wind projects.

Unfortunately, only Xcel seems to have benefited, as consumers have been stuck with incredibly high-cost energy while Xcel's profits have exploded in recent years.

So, before anyone feels sorry for Xcel, or for those who may think it is the victim of misguided energy policies at the state and federal level (which are often misguided), understand that Xcel’s reliability crisis is a disaster of Xcel’s own making and the result of its own internal initiatives.

Xcel’s Self-Imposed Resource Adequacy Problems

Xcel’s reliability issues are self-inflicted wounds stemming from years of pursuing a 100 percent carbon-free electricity grid, which necessitated the closing of reliable generators like coal plants that the company now wants to delay.

Let’s look back in time to when Xcel became the first utility to commit to 100 percent carbon-free electricity in December 2018. At the time, Xcel’s environmental policy manager, Nick Martin, explained, “As the economics of clean energy have improved, it became clearer that we could meet more aggressive goals without sacrificing affordability or reliability for our customers.”

The Comanche Report has determined that this was incorrect.

Since then, Xcel has consistently accelerated its plan to exit from coal and build new wind and solar facilities, and publicly supported clean energy legislation in multiple states.

In Colorado, specifically, House Bill 19-1261—also known as the Climate Action Plan—and Senate Bill 19-236 were signed into law by Colorado Governor Jared Polis on May 30, 2019, which collectively set out targets for Colorado to reduce its greenhouse gas emissions by 80 percent by 2030 and made it mandatory for electric utilities like Xcel to file clean energy plans to pursue a clean energy transition.

Xcel supported these initiatives, and when it filed its Clean Energy Plan in 2021, it explained that these policies “established a pathway and guidance for large regulated utilities to achieve the same goals we announced using Colorado’s ERP process.”

When Xcel’s Clean Energy Plan was eventually passed in 2022, it had accelerated the retirement of several coal facilities, including Comanche Unit 3, from 2070 to 2030—40 years earlier than scheduled and only 20 years after being placed into service.

Xcel noted at the time that it would also seek to “add ‘always available’ power sources to help back up wind and solar and maintain grid stability and reliability,” but it severely underestimated the implications of the policies it advocated for and supported. Every time Xcel sought new natural gas plants in the state, Colorado policymakers, regulators, and environmental groups would push instead for more wind, solar, and storage, arguing that natural gas would be sunk costs given the state’s emissions-reduction mandates.

This wasn’t just the strategy in Colorado. Xcel supported clean legislation in Minnesota and coal retirements in New Mexico and Texas, as well. In fact, a 2022 investor’s new release from Xcel noted the following:

Retiring coal generation while continuing to add reliable and affordable clean energy sources are key to Xcel Energy’s strategy in the eight states it serves.

To summarize: Xcel not only supported legislative efforts to close down coal power plants and build unreliable generators, but its own company goal of 100 percent carbon-free preceded them. And now, because of these efforts spearheaded by Xcel itself, reliability has been undermined in Colorado to the point that the same company is noting how critical these coal assets are for reliability.

No Scenario Meets Reliability Standards

In the Comanche Report, Xcel analyzed reliability for several scenarios: one where it didn’t have Comanche units 2 and 3, a baseline scenario that extends Unit 2 through the end of 2026 and repairs Unit 3 in 2026, and scenarios A—D that have different extensions for the Comanche units and that include other small retirement delays and additions.

Shockingly, as shown in the figure below, no scenario maintained reliability above the industry standard of .1 Loss of Load Expectation (LOLE), which simply means that the utility could expect a loss of load one day over 10 years. As the company notes:

“Looking closely at the Company’s loss of load probability analyses, the various sensitivities indicate substantial risk in the next two years. Under all analyzed scenarios, the Company’s loss of load probability exceeds the planning standard of less than 0.1. In some cases, the loss of load probability is over 10 times greater than planning best practices.”

This isn’t a surprise to many of us, but it might be to those who believed Xcel when it said it could reliably and affordably pursue an energy transition to reduce emissions. As stated in its Clean Energy Plan in 2021:

After many years of technical and system advancements, we are able to confidently present for consideration by the Colorado Public Utilities Commission (“Commission”) a plan that would achieve by 2030 an estimated 85 percent reduction in carbon dioxide emissions from 2005 levels and deliver nearly 80 percent of our customers’ consumed energy from renewable resources. What makes this plan even more extraordinary is it accomplishes these objectives without compromising the Company’s longstanding focus on reliability and affordability.

Even though Xcel failed in maintaining reliability and affordability for its customers, it succeeded in growing its profits for shareholders.

All About that (Rate) Base

Xcel’s investor presentation conveys an entirely different tone than the somber Comanche Report. This tone can be most aptly illustrated by the image below.

Over the years, Colorado’s energy policy has shaped the assets in Xcel’s rate base. Based on S&P Global data, spending on generation, transmission, and distribution has surged nearly threefold, from $4.8 billion in 2009 to $13.6 billion in 2024.

This figure is roughly commensurate with the $12.5 billion estimate reported by the Colorado Public Service Commission.

The timeline below shows major capital expenditures in the generation category by plant and cost. The increases in 2010 can be attributed to the addition of the Comanche 3 coal facility. Xcel also acquired two natural gas plants from Calpine in the early 2010s and converted the Cherokee coal plant to natural gas. The rate base increased again in 2018 when the Rush Creek Wind facility came online, and again in 2020 with the addition of the Cheyenne Ridge Wind facility.

Looking forward, Xcel is planning to spend huge sums on solar, wind, battery storage, and transmission lines in accordance with the policies it helped create.

From 2025 through 2028, Xcel is projected to build 901 MW of solar, 1,550 MW of wind, 600 MW of battery storage, and just 600 MW of new natural gas in its Public Service Company of Colorado territory, shown below as PSCo.

These malinvestments will lead to substantial growth in Xcel’s rate base.

Slide 62 from Xcel’s investor presentation shows the company’s rate base will increase by $17.6 billion in the next five years, as the company spends $4.9 billion on distribution upgrades, $4.65 billion on transmission upgrades, including its Colorado Power Pathway project, $2.2 billion on renewables, and $1.79 billion on “electric generation,” which we are told is a euphemism for new natural gas plants.

A recent webinar by the Colorado Public Utilities Commission shows a range of potential rate outcomes from Xcel’s spending plans. Rate hikes could be modest if load growth is substantial, but if load growth comes in below the forecast, Xcel’s own rate forecasts suggest this buildout could cause residential electricity prices to skyrocket by 55 percent in 2029, compared to 2024 levels.

The beatings will continue until policies improve.

Unfortunately, the people of Colorado are living H. L. Mencken’s quip about governance: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” Colorado voters are reaping the consequences of the energy policies their elected officials enacted, with Xcel’s help.

Conclusion

Xcel Energy’s current reliability dilemma is a self-inflicted wound from decades of self-serving policies.

Perhaps Xcel thought they could feed the crocodiles by funding green advocacy groups and lobbying for carbon-free mandates, shut down their coal plants, and then cash in on new natural gas plants as the company’s reserve margins dwindled downward.

However, the new gas plants were blocked by the very interest groups Xcel helped cultivate, and now the company will be lucky to make it through the next few years without blackouts. If there are blackouts, there will be backlash, and Xcel will deserve every bit of it.

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