Independent Power Producers Denounce Colorado Law for Power Plant

A group of independent power producers says a proposed state law to develop an experimental coal-gasification power plant is a sweetheart deal for Xcel Energy because of a skewed bidding process.

"Xcel doesn't want competition," said Nick Muller, executive director of the Colorado Independent Energy Association, which represents more than 20 companies that build power plants.

Xcel defends the bill as necessary to develop a risky, next-generation technology that is needed to meet a growing demand for electricity.

The payoff to the winner: as much as $200 million in federal funds to help develop the project and a chance to become an industry leader in a breakthrough technology.

House Bill 1281, which as of Friday looked like it would be heading to the governor, requires the Public Utilities Commission to consider the development of an "integrated gasification combined cycle electric generation facility," if the so-called IGCC technology is shown to be feasible.

Environmentalists back the bill because the clean-coal power plants would cut carbon dioxide emissions. Labor unions support it because Xcel would build the plant using union workers.

A Colorado IGCC plant would be the first at high altitude and the first to use lower-energy-content Western coal. Only four such plants are operational worldwide -- two in the United States and two in Europe.

As originally written, the bill, sponsored by Sen. Majority Leader Ken Gordon and Rep. Jack Pommer, had no bidding mechanism. But an amendment last week gave the PUC the power to decide whether to seek bids.

Muller said the amendment doesn't help independent producers because there is no certainty the PUC won't just give the project to Xcel without a bidding process. Without those assurances, independent producers aren't willing to undertake expensive pre-construction development and planning work.

"The amendment really doesn't do anything," he said.

Xcel spokesman Mark Stutz said independent producers haven't bid on coal plants in the past, but they've built plenty of gas-fired power plants that sell power to Xcel.

"Independent production in Colorado has been the majority of new (electric) generation we've added over the past five years," said Stutz.

The proposal also has angered Xcel's largest customer because it allows the utility to charge its ratepayers for the cost of what could be a $1 billion plant before it is up and running. That's a change from the current approach, which only allows collection of development costs after a plant is operational.

Mark Davidson, attorney for Rocky Mountain Steel Mill, said the Pueblo plant could be on the hook for as much as $15 million over the years -- plus decommissioning costs if the technology ultimately doesn't work.

"It's essentially a guarantee of return on investment," he said.

Stutz said Xcel needs that return, because it would be making a tremendous investment in an experimental technology that would not only benefit the environment but provide a new market for Western coal.

"It's a modest return recognizing the funds spent for work in progress," he said.

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