The way Colorado pays for electricity is about to change.
Our state is preparing to join a new electricity market that will connect Colorado to an electrical grid that includes many other Western states. This raises a multibillion dollar question: Which electricity market will our leaders choose?
If we choose wisely, Colorado will secure cheaper, cleaner, more reliable energy for decades to come. But there is also a risk that Colorado will take a path that will mean higher electricity bills, less reliable energy for rural communities and missing out on big opportunities from a growing clean energy industry.
As the CEO of La Plata Electric Association and former Colorado state senator who spent 10 years working on Colorado energy policy, I am concerned about Xcel’s proposal at the Public Utilities Commission (PUC) to rush into a bad deal for Coloradans who simply cannot afford higher energy bills; and there is no need to rush when there are better options on the table.
Four years ago, I co-sponsored Senate Bill 21-072, a bipartisan law designed to ensure that Coloradans benefit from efficiencies and cost savings provided by regional electricity markets by requiring all of the state’s electric utilities to join an organized wholesale market no later than 2030.
If done right, electricity markets deliver lower-cost electricity, improve grid reliability, increase access to clean energy resources, and reduce harmful emissions. But not all electricity markets are the same — different markets offer different benefits, and it’s up to Colorado’s energy leaders to conduct a thorough comparative analysis in order to get the best possible deal.
Colorado currently has several electricity market options to choose from, including Markets+ and the Extended Day-Ahead Market, or EDAM. Both allow trading electricity across utility service territories one day ahead, creating efficiencies compared to no trading because it allows utilities that have too much supply to provide this electricity to others that may have too little.
These day-ahead markets are upgrades from status quo, but ultimately a regional transmission organization, or RTO, is where the real benefits lie for ratepayers. A RTO can add significant efficiencies by coordinating not only electricity generation and use, but also the transmission needed to get that electricity from point A to point B.
Comparing a day ahead market to a RTO is like comparing a single-lane toll road to a four-lane interstate highway: they do similar things, but on a vastly different scale.
Xcel has indicated it isn’t ready to join an RTO just yet. Unfortunately, their choice for an alternative is Markets+, the most limited option available. It offers the fewest services, costs more in the short term and will take the longest to deliver meaningful benefits to Coloradans who want cheaper, cleaner energy.
EDAM would initially offer the same market services as Markets+, but is expected to be joined by more and larger utilities with better access to diverse clean energy resources. This is likely to lead to lower costs for Coloradans, as evidenced by a recent study released by Aurora Energy Research, which found savings between $4.2 million to $13.2 million per year for Colorado ratepayers if Xcel joined EDAM instead of Markets+. These results are consistent with similar studies around the West: a larger market with more diverse resources leads to lower costs.
Xcel has presented no evidence indicating that Markets+ is a better choice for Coloradans than the alternatives, and Xcel hasn’t provided a clear path to transition from Markets+ into another market that would offer the full suite of services available under an RTO.
This month, the Public Utilities Commission is hearing testimony regarding Xcel’s application to join Markets+. They should use this opportunity to slow things down and insist on a more thorough comparison of all available options to deliver the most affordable, sustainable and reliable electricity available.
A rush into Markets+, even when all indications suggest better options are available, risks making a bad deal and sticking Colorado families across the state with the bill for decades to come.
Chris Hansen, of Durango, is the CEO of La Plata Electric Association and a former member of the Colorado State Senate, where he specialized in Colorado energy policy.
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