RESA REPORTING IN COLORADO: BIG DATA WITH MANY STAKEHOLDERS

RESA REPORTING IN COLORADO: BIG DATA WITH MANY STAKEHOLDERS Leslie Martel Baer, MS, MA Energy Intersections, LLC 660 Hudson Street Denver, CO 80220 e-mail: leslie.baer@energyintersections.com ABSTRACT Xcel Energy, the largest investor-owned utility in Colorado, collects 2% of electricity usage to meet the state-legislated renewable energy standard. Xcel submits a biannual Renewable Energy Standard Compliance Plan and monthly Renewable Energy Standard Adjustment reports, serving several stakeholder groups: Xcel staff; PUC Commissioners and staff; state policy makers; ratepayers; renewable energy businesses; and industry trade associations and non-governmental organizations. Audits of these data occur internally within Xcel; the PUC also may audit if deemed necessary. Although stakeholders generally view the data as reliable, they are not always perceived as transparent or accessible. With an increasing number of programs and data collected, the process implemented by Xcel to gather and report the data needs updating. While a third-party audit of these data is not broadly sought at this time, modification to improve the process and transparency would benefit stakeholder groups. 1. RESA REPORTING: MANY FUNCTIONS Under Colorado s Renewable Energy Standard (RES), investor-owned utilities (IOUs) must generate 30% of the electricity they sell in the state by renewable resources by the year 2020. Some other electricity providers, such as rural electric associations (REAs) and municipal utilities may have to meet a lower requirement, depending upon their size. The RES is further complicated by multipliers applied to certain types of projects, for example on in-state wind projects. While both Xcel Energy and Black Hills Energy are subject to RESA requirements, this report will focus on the reporting process employed by Xcel Energy. To meet the RES, IOUs collect 2% of all retail electricity charges, a fee to ratepayers known as the renewable energy standard adjustment or RESA. These fees are then held in a RESA account and used to pay for incentives and expenses related to RES activities. (1) The RESA account supports a number of different types of programs, including the incremental cost of power from utility-scale renewable generation, such as wind farms, and renewable energy credits (RECs) purchased from on-site generation by small- and medium-sized solar installations. (2) As a result, the reporting on inflows and outflows of this account serves a broad range of stakeholders from Xcel staff to renewable energy industry associations as well as the fundamental function of monitoring progress toward RES compliance. 1

1.1 Fundamental RESA Reporting Functions At its core, accounting for and reporting of the RESA demonstrates that utilities are collecting the appropriate funds from retail customers and distributing them to qualifying projects. Interested parties can see, in an aggregated fashion, collections and disbursements. The reporting also verifies the REC purchases made through contracts with participants in various programs, resulting in an estimate of generation from the 2% fee. (3) rider. Because Xcel Energy is ahead of schedule on its RES obligations for Colorado, it sells the surplus RE generation as RECs in support of the RESA fund. Expenditures are also reported by type, with payments out to the various programs enumerated. Additional detail is given in the accompanying budget pages. An additional monthly report documents the following items for the Solar*Rewards and other renewable generation programs or projects each month: These data are publicly available, by accessing the monthly reports and biannual compliance plans through the Colorado Public Utility Commission s website. (4) As can been seen in the sample data in TABLE 1, data are reported by revenue source. For example, Windsource, a voluntary REC purchasing program for retail customers, provides revenue to the RESA fund, as does the 2% RESA Number of project applications received; Number of projects completed; kw of capacity installed; The RECs acquired in MWh; Average turnarounds for rebates and for review; Total amounts spent; and Total dollar value of rebates and RECs. TABLE 1. PUBLIC SERVICE COMPANY OF COLORADO RESA REVENUES COLLECTED AND EXPENDITURES, SUMMARY FOR 2011 AND CUMULATIVE TOTAL Summary 2011 Total Cumulative Program Total Revenues by Source PSCo RESA Rider Revenue Collected (52,155,839.58) (199,578,933.44) Wholesale REC Rider Revenue Collected (13,725.43) (69,285.60) Windsource Rider (4,551,811.59) (11,593,109.56) Wind REC Cost Adjust. - Refund to RESA 0.00 (2,590,619.00) Retail Margins Bundled REC Gen\Prop (36,988,452.94) (36,988,452.94) Revenue Total (93,709,829.54) (250,820,400.54) Expenditures by Type Common to All Programs 94,681.70 3,841,251.99 Customer Sited Solar < 10 kw 12,316,770.80 151,973,119.73 Customer Sited Solar >10 kw 100 kw 21,484,705.33 37,171,414.11 Customer Sited Solar +100 kw 28,359,752.13 52,554,664.92 Small 3rd Party Developer 9,124,326.37 13,003,271.49 Non-Customer Sited Solar 0.00 420,447.20 Wholesale Costs 2,890.48 6,291.02 Incremental Costs 23,098,415.00 36,643,486.00 Solar Gardens 10 50kW 153,261.90 153,261.90 Solar Gardens 50.01 500 kw 155,067.97 155,067.97 Solar Gardens 500.01kW 2MW 153,925.15 153,925.15 Expenditures Total 94,943,796.83 296,076,201.48 Net Balance 1,233,967.29 45,255,800.94 Interest 3,559,321.38 6,111,617.18 Balance (Over) / Under 4,793,288.67 51,367,418.12 RESA Administrative & General Exp. 1,028,699.50 4,439,380.94 RESA Cost of Goods Sold (Energy) 93,915,097.33 291,636,820.54 Total RESA Costs 94,943,796.83 296,076,201.48 2

1.2 Ratepayers For most ratepayers, the key need fulfilled by RESA reporting is to know that the 2% rider has been accurately collected on their bill and that those funds are being disbursed to qualifying projects appropriately. Individual ratepayers can check the calculation of the rider on their monthly bills, but the RESA reporting (as well as additional, confidential documents produced by Xcel and held by the PUC) confirms collection in aggregate. (2) 1.3 Investor-Owned Utilities Interests IOUs such as Xcel must market and manage the renewables programs to meet the requirements of Colorado s RES. They also have a responsibility to ratepayers to demonstrate that funds for these projects are collected accurately and are used as required. Further, Xcel must demonstrate wise use of funds to its investors, to whom it must elucidate any positive or negative impacts of the program such as the current shortfall in the RESA all while meeting the legal requirements of the RES. In addition to monthly reports addressing historical actions, Xcel must submit biannual (formerly annual) Compliance Plans. These plans are the starting point for future program compliance, describing resources the company has identified, including location, type of technology and scale, any bids that will be requested for larger projects, and how pricing will drive certain contracts. This plan must be deemed in line with rules and able to meet RES compliance by the PUC. (5) Request for proposal or RFP information gathered by the IOU to meet bid requirements are summarized in these reports; specific pricing information is not released to the public to protect the confidential nature of these data. (5) RESA reporting supports the IOU s need to meet all of these obligations. However, it may be able to fulfill those obligations under reporting structures particularly frequency other than currently required. 1.4 Policy Makers Colorado s PUC is responsible for ensuring that the RES is met; it is also responsible to ratepayers for overseeing that the 2% fee is being collected and spent appropriately. The PUC s Advisory Board provides information and guidance to the Commissioners as decisions are made and dockets proceed, such as when a new compliance plan is submitted by an IOU or an RE program is added. By contrast, the Trial Staff are responsible for determining whether or not reporting is accurate and if an audit of data submitted by an IOU is warranted. (2) The PUC reviews each RESA compliance plan submitted by the IOUs, under Section 3650 Renewable Energy Standard Rules; these rules guide whether or not the Commission approves the plan and impacts implementation, such as the 25% multiplier on in-state wind projects. State lawmakers also have an interest in seeing that the law is being met and how the market is bearing the RES mandate. 1.5 Renewable Energy Businesses Interests Those entities that perform most of the qualified installations under the RES and whose business strategies are built upon the future of these programs naturally have an interest in the data. They will be looking for unused capacity in programs, how rapidly the market responds to new programs and other changes, and the extent of competition as measured by numbers of installations. 1.6 Industry Trade Associations and NGOs Interests Additional industry interest in RESA reporting may be found at industry trade associations that are working to further the efforts of their business members, as well nongovernmental organizations that work to further the cause of the industry as a whole. These organizations monitor the implementation of the programs and the successful accomplishment of the RES, as well as the RE market and program impacts on the market. 2. PROCESS FUNDAMENTALS 2.1 Xcel s Monthly Process Each month, Xcel staff members pull data from their databases, apply appropriate filters and sorting, summarize the data, and pass it on to colleagues for review and approval. Because the process was originally designed to accommodate systems totaling 34 MW of capacity, it is highly manual. Without a production meter on each system, production was estimated. Now, with over 100 MW of capacity in the program and production meters in use on systems installed after March of 2011, there is not only a much larger amount of data to manage, the production data must be pulled individually from each relevant account. (6) Further, because of the time lapse between submission of an application, approval and construction of the project, these data do not match up on a one-to-one basis each 3

month which often leads to confusion by public observers of the process. There is also a roughly threemonth lag in reporting. (5) However, the Xcel staff has been able to create a process that is manageable from month to month. And, they have achieved the goal of having everyone Xcel staff, PUC members and the public viewing the Xcel site working from the same data set. Xcel recognizes the need to assess the benefit of more automation of the process without generating undue cost. The Solar*Rewards Community program, launching in 2012, is the most complex program structure to date; to prepare, Xcel has already invested in a higher level of automation for the required record-keeping and reporting than for any other program. (6) 2.2 PUC Involvement and Opportunities for Audit The PUC Trial Staff look at both the monthly reports and the Compliance Plans to discern both compliance and any potential irregularities in the reporting. If deemed necessary, these staff members may request discovery of substantiating documents from the IOU. (5) Xcel Energy undertakes a voluntary internal audit of its RESA reporting every three years. Its team members report that errors have been identified via this process, and past reports are corrected and re-filed in such cases. (6) PUC Trial Staff also have the authority to audit the IOU s data, from monthly reports to RFP data. 2.3 Third-Party Involvement Companies, organizations and individuals can request intervener status for the proceedings of a relevant docket at the Commission. Entities demonstrating that they are materially affected by a given docket can give testimony at PUC hearings and request information from the Commission. (5) 3. ISSUES OF CONTENTION IN REPORTING 3.1 A Budgetary Shortfall Less of an area of contention than an issue of concern for the program manager Xcel Energy, the current shortfall in the RESA account began in 2008. This shortfall occurred because the popularity of Solar*Rewards and its up-front incentive (UFI) structure resulted in higher than anticipated outflows with low inflows from 2008 to 2010. The program was restructured in March of 2011, with an emphasis on performance-based (PBI) REC purchases, which permits Xcel to spread the payments over time. As a result, the company has been making loans to the RESA fund; the fund should come back into balance sometime from 2015 to 2017, depending upon the sales of surplus RECs, the revenues from the Windsource program, and similar factors. (5) What is contentious in this situation is that Xcel is paying itself interest on the loans to the RESA fund. While the statutes explicitly permit this measure under CO HB 10-1001 and, some may argue that charging a cost of capital is a normal business operation it may be equally valid to suggest that Xcel is earning money off of a program that it failed to plan for and manage adequately. As a result, over time, a portion of the RESA is going to pay Xcel rather than going into renewables projects. At the same time, it would not be unreasonable to suggest as well that the PUC failed in its capacity by approving a Compliance Plan that obviously understated demand for the program and failed to balance the up-front outflows required to meet that demand for UFIs with the spread out inflows generated by the 20-year production contracts of approved systems. Thus, the compromise of having Xcel provide loans to the program and receive the interest payments assists in achieving its 30% renewables by 2020 mandate. 3.2 The RESA Rider Cap The amount that IOUs can charge ratepayers to fund the RESA account and, therefore, the primary amount that can go toward meeting the RES requirements is capped at 2% of retail electricity charges. Some observers are skeptical, however, that the cap has much meaning. (7) Yet, the debate here may simply reflect a lack of understanding on the part of the public that, generally, some costs of all types of generation e.g., investments resulting in avoided costs, such as paying for new gas turbines or fluctuations in gas prices are paid for under the Electric Commodity Adjustment (ECA), while only the difference in generating electricity from a renewable source as compared to a conventional source is paid for out of the RESA fund. (2, 5) This debate is fueled by disagreement over the calculation of incremental costs. There are also concerns that the RESA cap is being avoided by applying a $20/ton carbon rider against conventional generation, as well as an avoided capacity cost of $4/kW/month credited to renewables. (5, 7) The debate continues as to whether or not these practices legitimately represent the intent of the RESA or represent a manipulation of energy costs whether to achieve RES compliance or for some other reason. Questions also remain as to whether or not the increased wear-and-tear and start-up costs on conventional 4

generation plants from ramping up and down to accommodate variable renewables is adequately factored into the cost of renewables or, whether there even is a legitimate cost differential being generated by these actions. (5) 3.3 Calculation of the Incremental Cost of RE One of the most contentious areas of reporting is the payment of incremental generation costs of renewable energy. Currently, wind generation is compared to natural gas generation on a kwh basis. If gas prices are high, wind becomes more competitive, resulting in an incremental credit to the RESA fund. If gas prices are low, as they are today, wind generation is more expensive and an incremental cost is counted against the RESA fund. (5) The statute indicates that the comparison is to be made for new wind generation against new gas generation; therefore, it should include plant construction in both sides of the comparison. However, the comparison is typically made against ramping up an existing gas plant with the inherent costs of ramping gas generation up and down included in the numbers but not construction. (2) Given the volatility of natural gas prices although the PUC does permit IOUs to lock down the incremental costs for 5 years on the RE assets they own this cost is dynamic and of interest to several stakeholder groups. The argument could be made that the calculation as practiced is biased because it is comparing existing generation against new and current loads are high enough to justify comparing new to new. On the other end of the spectrum, the argument has been made that existing gas plants are having to ramp up and down more to accommodate the variability of wind plants, when the wind plants are only required to meet the RES and are not actually necessary in the portfolio to meet load. As a result, virtually all sides of the discussion are dissatisfied with the current calculation. 4. ARE STAKEHOLDERS RECEIVING THE DATA THEY NEED OR JUST A LOT OF DATA? While a significant amount of data about the RESA are available in aggregate through the PUC website and the Xcel Energy Solar*Rewards website (8), some observers note that it may not be the data that are of greatest use to certain stakeholder groups. And, the key is not simply to request more data, but to make a focused request of relevant data. (9) For example, the January 2011 report indicates that 144 small solar systems were completed. However, to understand the market, one might wish to know such details as the pricing of the top 10 systems, the dominant supplier, and where these systems are being installed. Both Xcel Energy and the PUC can access these more detailed data, allowing them to watch how the market is evolving and responding to the programs; however, RE businesses and industry trade associations cannot see these data, for the most part. (5) Despite the apparent checks and balances, these are selfreported data and, while there is a broad consensus that the data fundamentally can be trusted, there are few calls or occasions for parties outside of Xcel to examine them in detail, such as in an audit. (2, 5, 6, 9) While this consensus also concludes that regular, periodic third-party auditing of these data would not be practical, there is a desire to see the data reported and shared in such a manner that would make them more accessible and valuable to stakeholders beyond the IOU and the PUC. For example, RE businesses and industry groups wishing to evaluate the market as well as ratepayers more broadly would benefit from understanding how much actual generation in MWh/year were produced by the qualifying systems. These data are reported in terms of RECs purchased for many an adequate proxy for generation; however, they are not reported in terms of actual production, nor are they reported on the Solar*Rewards website. (9) Instead, interested parties must locate and interpret the appropriate monthly reports from the PUC website. Similarly, the percentage of retail distributed generation (DG) producing the reported RECs is of interest to many stakeholders watching the renewables markets in Colorado. However, these data are not reported in a manner accessible to the lay person ; indeed, only an approximation could be gleaned by an individual analyzing the monthly RESA reports. (9) Under the new PBI structure of Solar*Rewards, solar photovoltaic systems will now have a net meter and production meter, rather than a single meter performing net metering. These data will be collected monthly, allowing aggregated reports of actual generation. While systems are currently being installed using this approach, the production of systems installed under the previous incentive structure will still have to be estimated. (6) Ultimately, however, the issue for many stakeholders remains accessibility of data. Even if precise generation data cannot be reported, industry-related stakeholders would like to see system capacity data in a cumulative format reported on the Xcel Solar*Rewards website, rather than buried in the technical details of the monthly 5

RESA reports. (9) More remote stakeholders are not alone in their struggles with these data. Xcel staff note that their original process and system was built to accommodate what was anticipated to be systems totaling 34 MW of generation capacity. Over the past six years, however, the programs have been very popular and new programs have been added, bringing current Solar*Rewards systems capacity to over 100 MW. Their study of the possibility of increased automation of the system and their request for a lower frequency of reports reflect Xcel s need to balance the cost of reporting with the perceived benefit. (6) 5. CONCLUSION While the data reported in Xcel Energy s RESA reports are generally accepted as valid, several stakeholder groups wish to see more information reported in a publicly accessible and user-friendly locale such as the Solar*Rewards website. There remain contentions around a few key reporting issues, such as calculation of the incremental cost of renewables, that must continue to be addressed between Xcel, the PUC and relevant interveners. Further, Xcel would do well to implement automated systems to the greatest extent justifiable by their cost: doing so will streamline their internal processes and permit the company to respond to legitimate data requests promptly and efficiently, with easy to access and understand data. Finally, perhaps one of the most interesting aspects of RESA reporting is why there is not a greater concern over the interest that Xcel is paying itself on loans it has used to keep the RESA fund balanced. If companies are able to make money by failing to keep programs they are required to manage in balance, then there is little incentive for them to achieve that balance over the near-term. 6. NOMENCLATURE DG: Distributed Generation ECA: Electric Commodity Adjustment IOU: Investor Owned Utilities NGO: Non-Governmental Organization PBI: Performance-Based Incentive PUC: Public Utilities Commission RE: Renewable Energy REA: Rural Electric Association REC: Renewable Energy Credit RES: Renewable Energy Standard RESA: Renewable Energy Standard Adjustment UFI: Up-Front Incentive 7. ACKNOWLEDGEMENTS The author expresses her gratitude to the Colorado Solar Energy Industries Association (COSEIA) for suggesting this topic of research. She thankfully acknowledges the personal support and encouragement of RJ Harrington of COSEIA. 8. REFERENCES (1) Colorado Department of Regulatory Agencies, Public Utilities Commission (PUC). Rules Regulating Electric Utilities. 2010. Pg. 32. Docket No. 10R-243E; Decision No. C10-0952. (2) Davis, R., Chief Advisor, Public Utilities Commission. Interview by Leslie Martel Baer, March 15, 2012. (3) PUC. Public Service Company of Colorado Renewable Energy Standard Adjustment Revenues Collected and Expenditures. December 2012. (Accessed at http://www.dora.state.co.us/puc/index.htm using Docket No. 06S 016E as the search parameter.) (4) PUC. Public Utilities Commission. 2012. (Accessed at http://www.dora.state.co.us/puc/index.htm.) (5) Dalton, W., Staff Engineer, Public Utilities Commission. Interview by Leslie Martel Baer, March 15, 2012. (6) Kittel, R., Director of Regulatory Administration and Newell, P., Product Manager, Solar, Xcel Energy. Interview by Leslie Martel Baer, March 21, 2012. (7) Yeatman, W. How Xcel Avoids the Rate Cap on Green Energy. Independence Institute: Energy Policy. March 1, 2011. http://energy.i2i.org/2011/03/01/how-xcel-avoidsthe-rate-cap-on-green-energy/ (8) Xcel Energy. Solar*Rewards. Accessed at http://www.xcelenergy.com/save_money_&_energy/for_ Your_Home/Renewable_Energy_Programs/Solar*Rewards _-_CO (9) Carmichael, A., Solar Policy Director, Vote Solar. Interview by Leslie Martel Baer, March 15, 2012. 6