National Wind Watch: Wind Energy News » Xcel credits spark dispute

Xcel Energy is selling millions of dollars’ worth of wind-energy credits to California as a debate rages over how much of the money should go to ratepayers and whether it should be used to lower bills.

In 2010, Xcel sold $33.6 million worth of Colorado renewable-energy credits to California, and there is the potential of millions more in sales over the next five years, according to energy brokers.

A case to decide how money from future sales is apportioned and used is before the Colorado Public Utilities Commission.

Xcel is proposing an 8 0/20 split, with customers getting the larger share. The company needs that incentive to develop trading expertise among renewable-energy credit markets, said Eric Pierce, Xcel’s managing director of energy trading.

“There is a big market in California, but the biggest issue is there is no standard contract,” he said. “That makes every transaction more complex.”

The state Office of Consumer Counsel is seeking 85 percent for ratepayers. The PUC staff wants Xcel’s share to decline from 20 percent to 14 percent over three years.

“These are trades that have virtually no risk for Xcel – the wind farms are already built – and the funds ought to benefit consumers,” said Bill Levis, director of the OCC.

Xcel and the OCC are also at odds over how the money should be used. The utility wants the funds reinvested in renewable-energy programs, but the consumer counsel wants at least part of the money to go toward lowering ratepayers’ monthly bills.

“We’d like to see customers get some direct benefit from the sales,” Levis said.

The renewable-energy credit – or REC – is a way for utilities to share their renewable-energy resources.

Xcel is slated to have 1,760 megawatts of wind generation this year – more than needed for current Colorado renewable-energy standards.

The surplus can be sold in an emerging REC market in 1-megawatt-hour increments to help other utilities meet their renewable-energy requirements.

“It is a way to get more revenue into renewable-energy development,” said Lori Bird, a senior analyst with the National Renewable Energy Laboratory in Golden.

In 2010, Xcel embarked on a pilot program selling 1.1 million RECs combined with electricity to California.

Under a PUC-approved agreement for the pilot, customers get about 54 percent of the $33.6 million and Xcel gets 36 percent. The remainder goes to a pilot plan to buy carbon offsets for the utility’s carbon-dioxide emissions.

California is close to passing legislation that will mandate that 33 percent of the state’s electricity come from renewable energy and simplifying REC sales, said Nicole Shaughnessy, a managing director at energy broker Evolution Markets.

“California is going to drive the market,” she said.