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Colorado voters rule for renewables -- Mandate contains features that could make it a role model

For the first time in the United States voters, rather than legislators, have implemented a minimum state standard for renewable energy. Last month, Colorado joined the ranks of 17 other US states with mandates for renewable energy after voters approved a ballot initiative by a tight 53% margin. The decision to put the vote to the people was taken after the state legislature turned down a renewable energy standard (RES) three times in the last three years. Republican House Speaker Lola Spradley then turned to the voters with Amendment 37, a ballot initiative setting a renewables target of 10% of energy sales by 2015.

The law calls for Colorado utilities with more than 40,000 customers to produce 3% of their electricity from renewable energy by 2007, 6% by 2011 and 10% by 2015. Solar must make up 4% of the 10% goal, or 0.04% of total energy sales. Less than 2% of the electricity sold in Colorado now comes from renewable sources and a study of the ballot measure concluded that the amendment would bring wind energy's market share to just 8.5% by 2025.

If there is a problem with the initiative, says Andy Whipple of the Western Colorado Congress (WCC), it is that the renewables target is too modest. The WCC is a grassroots group that campaigned for the initiative across Colorado's western slope of the Rockies.

Still, the Colorado mandate contains features that could make it among the more successful in the nation. It sets interim targets, provides penalties for non-compliance, as well as an incentive for creating economically successful projects within the borders of Colorado (a megawatt installed within the state is worth 1.25 MW toward the target). It also allows utilities to buy and sell renewable energy credits (RECs) to meet their RES targets.

The law sets an upper limit of $0.50/month on how much the RES can cost residential ratepayers and it allows the state's utilities, particularly its municipal and public utilities, to opt out of the mandate if their customers vote to do so. Colorado Springs Utilities (CSU), which gets about 1% of its electricity from wind and where just 44% of its 120,000 customers voted for the measure, is already considering that option. Opting out, however, would be a daunting task, Whipple says, and the amendment was designed that way. One-quarter of a utility's customers must vote and over half must vote against the RES.

Utilities, such as CSU and Xcel Energy, the state's largest utility with over one million customers, also say the rate cap could cause a shifting of costs from residential customers to commercial and industrial customers -- and that is one reason they opposed the ballot measure. One cost the utilities think is high is the $2/watt rebate to homeowners for installing photovoltaic arrays on homes, which would amount to $2400-$3600 on a $15,000 photovoltaic system.

Rates unchanged

But a report by consultant Ronald Binz, who supported the initiative, concluded rates would remain "virtually unchanged," even with the solar rebate. For CSU, the report says, the impact will depend on the route the utility pursues. If it begins immediately to buy wind energy, residential rates will drop an average of $0.33/month over a 20 year period. If CSU delays its acquisition and, instead, fulfils its requirement with RECs, rates will rise $0.14/month. A combined strategy would yield an average $0.09/month increase. None of the three options would result in increases exceeding the $0.50/month cap. Xcel customers would see an increase of $0.01/month, Binz says.

Xcel's Steve Roelstad says the utility will not challenge the law. With 242 MW of wind energy now in its supply portfolio, it is already well ahead of the curve for the 3% target in 2007 and will not have to build more until 2010 if it successfully completes plans to acquire more. Xcel recently received 12 bids for 17 projects worth 2000 MW resulting from a solicitation for renewable energy it released in August (Windpower Monthly, September 2004). The utility plans to whittle the bids down to 500 MW and to energize those projects in 2005. The Colorado Green project, the 162 MW project completed last year by GE Wind Energy with GE 1.5 MW turbines, and owned by PPM Energy and Shell Wind Energy, "saves our customers money because it offsets gas," Roelstad says. He attributed much of the low cost to the availability of existing transmission lines near the project and hopes the projects Xcel is now reviewing will have the same attribute.

The Colorado General Assembly, the lawmakers who have opposed an RES until now, must put their stamp of approval on the law early next year. The Public Utilities Commission (PUC) will then begin rulemaking. Xcel says it hopes the PUC will lend clarity to such issues as the rate cap, the penalties for non-compliance, the authority of the PUC to allow a utility to opt out of the mandate, and how RECs will be tracked and traded.

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