Early closure of Pueblo coal plant might drive Xcel clients to pay as much as $89M for water it doesn’t want

Pueblo Water has a proposal that Xcel Vitality can’t refuse. Truly, it’s extra of a contract than a proposal, requiring the utility to pay for 12,783 acre-feet of water yearly for its coal-fired Comanche Era Station even when it doesn’t use it.

Since 2010, the “take-or-pay” contract has price Xcel Vitality clients virtually $13 million for water by no means utilized by the plant in making electrical energy, and clients might be on the hook for as a lot as one other $89 million for unused water.

These are the estimates of the Colorado Public Utilities Fee workers. Xcel Vitality’s subsidiary Public Service Firm of Colorado filed testimony with the PUC saying that it took extra water than the workers estimated, but it surely nonetheless tallied roughly $6.4 million in extra water costs.

“This contract, by no means accredited by this fee, stands to lead to PSCo paying Pueblo Water tens of tens of millions of {dollars} for water that it doesn’t want,” Erin O’Neill, the fee’s chief economist, mentioned in testimony.

The water contract was some extent of competition within the $45 million electrical charge case settlement pending earlier than the fee. It was additionally challenged within the firm’s 2019 and 2021 electrical charge circumstances.

“It appears to return up in each case Xcel recordsdata,” mentioned Seth Clayton, Pueblo Water’s CEO.

Xcel contract spurred $60M spend on curiosity in a ditch

As a part of the electrical charge case settlement, Xcel Vitality agreed “to proceed to discover choices to mitigate the impression on charges of the historic Pueblo Water contract” and to report yearly on developments.

“Xcel has inquired about it for apparent causes,” Clayton mentioned. “We don’t need to change the contract nor do we now have any plans to take action.”

Servicing the Xcel Vitality contract was one of many causes Pueblo Water went out and spent $60 million between 2009 and 2011 to accumulate a 28% curiosity within the Bessemer Ditch, Clayton mentioned.

“Our competition is that Xcel has entered into this contract and we’re offering water earmarked for them and our clients ought to profit from that,” Clayton mentioned.

Within the early 2000s Xcel Vitality was getting ready to construct its $1 billion, 750-megawatt Comanche 3 unit on the producing station in Pueblo. The plant already had two working coal-fired models.

The 1,410 megawatts of producing capability on the station would wish a whole lot of water, which is used for cooling and for the stream that turns the generators to make electrical energy.

In 2005, Xcel Vitality signed a 60-year contract with Pueblo Water to take a minimal of 12,783 acre-feet a yr with a most of 14,700 acre-feet, earlier than dropping to a 5,218-acre-feet minimal in 2036. An acre-foot is sufficient to present for 2 households of 4 to 5 individuals with water for a yr.

The contract gave Pueblo Water the correct to extend the worth of the water by 5% a yr (costs have risen yearly by a mean 3.8%) and there was no prohibition on the water utility reselling any acre-feet not utilized by Xcel Vitality. The Xcel contract represents about 20% of the provides Pueblo Water gives clients yearly. 

“On the time this contract was executed, PSCo didn’t request or acquire fee approval to enter into this contract on the agreed take-or-pay phrases,” O’Neill mentioned.

Between 2010 and 2022 the producing station by no means used 12,783 acre-feet in any single yr, based on the PUC workers, leaving Xcel Vitality paying $12.8 million for almost 35,500 acre-feet unneeded water.

A part of the issue was the poor efficiency of the brand new Comanche 3 unit, with its  state-of-the-art supercritical, pulverized-coal expertise.

From its begin the unit has been plagued with issues. It was delayed approaching line for months by leaking steam tubes and in its first full yr of operation, 2011, it ran at half of its capability.

Between 2010 and 2022 the plant suffered greater than 700 days of unplanned shutdowns, based on a report by PUC workers.

For the reason that PUC report was issued the Comanche 3 has suffered one other than 125 days of unplanned shutdowns.

Via all these issues Xcel Vitality needed to pay for the water for Comanche 3 even when the unit wasn’t working.

A person fishing in front of a shack where water is drawn from the Arkansas River for use by a power plant
The Comanche pump station stands on the southern financial institution of the Arkansas River, a couple of mile down river from the Pueblo Dam and Lake Pueblo. Pueblo Water pumps leased water through underground pipes to Xcel Vitality’s coal-burning Comanche Producing Station. (Mike Sweeney, Particular to the Colorado Solar)

Price of unused water is roofed by Xcel electrical energy clients

Comanche 3 was initially slated to function by 2060 — the tip of the Pueblo Water contract — however within the face of strain from environmental and client advocates the corporate moved the closure date to 2031, with operations ramping down beginning in 2025. This can create even much less demand for water.

Between 2010 and 2022 Xcel Vitality paid for however didn’t use almost 35,500 acre-feet of water, based on the PUC workers.

For instance, in 2022, a yr by which Comanche 3 sustained shutdowns, Xcel Vitality used 9,194 acre-feet, 72% of its required take, paying $1.6 million for water not used. The price of the water is a part of the working and upkeep bills lined by buyer payments.

In rebuttal PUC testimony, Richard Belt, Xcel Vitality’s director of chemistry and water assets, made a distinction between water delivered to the plant and water utilized in making electrical energy.

Xcel Vitality took supply of 155,700 acre-feet between 2010 and 2022 with eight years near or above the contract necessities, Belt mentioned. This put the water not taken about 10,451 acre-feet at a price, utilizing PUC workers value estimates, of $6.4 million.

The Xcel Vitality figures are based mostly on deliveries whereas the PUC figures are based mostly on water used on the era station. This leaves virtually 25,000 acre-feet that was delivered to the Xcel facility however not used.

“Ms. O’Neill gives data relating to water consumption, which is totally different from water deliveries — the premise of the take-or-pay provision within the Pueblo Water contract,” Belt mentioned. “This can be a results of a misunderstanding of water knowledge. Sometimes, water consumption knowledge are supplied in response to requests for data in regulatory proceedings, as consumption knowledge permits for widespread comparisons between firm era services.”

Among the water was used for “ancillary makes use of, with some misplaced to evaporation from the on-site,” the corporate mentioned. The water is rarely used off website or for issues unrelated to the plant.

Kaite O’Donnell, a PUC spokeswoman mentioned in an e mail that the workers stands by its calculations.

The contract requirement drops to five,218 acre-feet in 2036 when the primary two Comanche models, opened in 1972 and 1973, have been slated to shut. Nonetheless, Comanche 1 closed in 2022 and Comanche 2 is now scheduled to shut in 2025.

The primary yr Xcel Vitality might search to terminate the contract can be 2036, with the corporate paying an $8 million exit charge over 5 years.

In oral testimony earlier than the fee Belt mentioned that it is perhaps sensible to hold on to the water contract as new vitality initiatives could also be positioned on the Comanche website.

“Water costs at the moment are 3 times what are within the Comanche water contract,” Belt informed the fee.

A huge solar array with a coal-fired power plant in the background
The Solar Mountain Photo voltaic mission provides 293 MW of energy. Comprised of almost 637,000 panels and spanning 1,700 acres in Pueblo County, the power went on-line in February. (Mike Sweeney, Particular to the Colorado Solar)

However Commissioner Megan Gilman questioned the concept of speculatively “holding these water rights and paying for them with ratepayer cash.”

O’Neill, the PUC economist, estimates that below the contract by 2041 Xcel Vitality clients might find yourself paying $89 million for unused water.

The electrical charge case handled one other long-standing water subject, Xcel Vitality’s possession of water rights in two ditch corporations in southeastern Colorado. The corporate bought so-called Southeast Water Rights in 1985 for $27 million.

Xcel purchased the rights with the expectation of constructing a coal-fired energy plant in that nook of the state.

“The Southeast Water Rights have by no means been used or helpful within the provision of electrical service and certain by no means might be. The fee burden of this buy 34 years in the past shouldn’t be borne by at this time’s ratepayers,” Kevin C. Higgins, an professional witness for Colorado Vitality Shoppers, which represents main industrial and industrial clients, informed the PUC in 2019.

Whereas Xcel Vitality clients haven’t paid for the water proper, they’ve serviced the debt on the funding. As a part of the electrical charge case settlement, the corporate agreed to take away the prices related to the water rights from buyer costs.