The Colorado Energy Plan and the Far Side of the Rubicon River

The phrase “Cross the Rubicon” is a reference to the ultimatum that the Roman Senate delivered to Julius Caesar not to bring his army across the Rubicon River.  When Caesar ignored that warning, the period of imperial Rome had begun.  Thus, to cross the rubicon has come to signify a decision point from which there is no turning back.  The nature of the analysis is such that the rubicon is usually only able to be seen in hindsight.  This is not so in the electric generation sector (in Colorado at least).  We are so far past the rubicon where renewable energy resources have outpaced the large coal-fired generation that dominated the 20th century that we can review the next big decision in Colorado energy policy as logical today to what was once only a “pipe dream” (a story for another day).  That decision point is known as the Colorado Energy Plan (CEP).

The CEP is an offshoot or add-on to the pending Electric Resource Plan (ERP) process of Public Service Company of Colorado (dba Xcel Energy) currently before the Colorado Public Utilities Commission.  ERPs occur every 4 years; though this current plan dates back to October 2015 (when it was first due).   Xcel serves approximately 65% of Colorado territory and, with over 1.2 million customers and approximately 7000 megawatts (MW) of demand on its system, is the largest utility by load as well.  The CEP would result in the early retirement (by 10 years) of the Comanche 1 and 2 coal-fired generation units.  These units have a capacity of about 660 MW.  The CEP would replace that capacity, along with 450 MW of load-related resource need, with a plan including a range approximating 1000 MW of wind, 600 MW of solar, and 600 MW of natural gas-fired units.  

The CEP has a number of associated parts.  There is a utility ownership target that independent power groups such as our client the Colorado Independent Energy Association (CIEA) negotiated in the settlement agreement that brought forward the CEP.  The targets are a range of 40 – 60 percent for renewables and 60 -75 percent for gas units.  The coal-fired units will have their remaining amortized capital costs paid off by reducing the revenue stream intended for renewable energy’s incremental costs, known as the “RESA”.  The RESA collects 2% of customer bills to pay for the incremental system costs for acquiring renewable resources.  For large-scale renewable resources, there no longer is any incremental cost because those resources these days cause overall system cost savings.  So, a cut for the RESA to pay down call redirects revenues to a similar purpose.  There are also transmission elements to the plan. 

The CEP has been bolstered by the remarkably low cost proposals for wind, solar, and energy storage that Xcel received in its solicitation for the ERP from independent power producers (IPPs).  The median price of the wind bids is less than 2 cents per kilowatt (kW) of capacity, and less than 3 cents/kW for solar capacity.  These prices have not before been seen in Colorado or much of the world for that matter.  In addition, Xcel is seeking to join the Southwest Power Pool market, where units are dispatched by an objective third party and not by each utility. Simultaneously, Xcel has taken notice that in areas of the country with established markets, coal plants are either retiring or sitting idle as uncompetitive.

The value of the bid prices received has allowed Xcel to focus its CEP case to the Public Utilities Commission on straight economics, before reaching the environmental benefits or market risks.  This process has allowed consumer groups and large industrial customers to support bringing the CEP forward.  But this analysis, of course, misses the point.  The CEP would not exist but for the urgent need to mitigate human contributions to climate change.   The costs of inaction on climate change dwarf any economic analysis on rate impacts when you consider that our functioning ecosystem is what allows our economy to exist.

The CEP is not the first coal retirement plan, even in Colorado.  Coal plants are being retired – or stranded – across the country also due to economics. The costs of using fossil fuels and mitigating the resulting emissions cannot compete against smaller plants that use natural gas or no fuel at all.  In 2010, Colorado passed the Clean Air Clean Jobs Act (CACJA), that retired approximately 900 MW of Xcel-owned coal-fired generation.  In that case, the tension between fossil fuel and renewables was at its zenith. The coal industry was still fighting back with traditional arguments at the PUC and in the courts.  When the CACJA was approved, the implementation of that statute was the march across the Rubicon River.

But today those days are behind us.  The paradigm shift has occurred.  The coal industry at the February 2018 CEP hearing solely debated the modeling and the accounting mechanism to recover the retirement of the Comanche 1 and 2 Units, even though there is no allowance for overall bill increases to accomplish the CEP.  When anything other than ratepayer bills are considered in the analysis, the competition isn’t even close.  This is not good news in the near term for regions that depend on a coal economy, but it is overall the best news for humanity.  The CEP is what life is like when the rubicon has been crossed, and the future that was envisioned decades ago for a renewable generation portfolio using natural gas as a “bridge fuel” has actually arrived.  Renewable technologies were given the opportunity to prove their worth, and they have met that challenge.  For the coal industry, Rome lies ahead.

Submitted by: Mark D. Detsky

Some Highlights from the October 2017 Commissioners’ Information Meeting on the Mountain West Transmission Group

On October 20, 2017, the Colorado Public Utilities Commission (“PUC”) held a Commission Information Meeting regarding the application of the Mountain West Transmission Group (“MWTG”) to join the Southwest Power Pool (“SPP”). This meeting covered an overview of the SPP and the MWTG, the transmission planning process, the SPP process related to integrating new members as well as to modifying SPP governing documents, and the projected timeline and next steps for the process.

The MWTG is a coalition of 10 electricity service providers with about 6.4 million customers and 16,000 miles of transmission lines in, mostly in the Rocky Mountain region.  It includes Basin Electric Power Cooperative, Black Hills Energy, Colorado Springs Utilities, Public Service Co. of Colorado, and Tri-State Generation and Transmission Association. Xcel Energy's Denver operation is also a member.


MWTG Footprint.png

MWTG formed and began discussion on the creation of a Regional Transmission Organization (“RTO”) in 2013.  Among the many options considered—from joining another RTO to the creation of their own—the members generated the most consensus on joining the SPP.  The organizations are now in the process of integrating Mountain West into the SPP as well as applying for approval of the integration with the appropriate state and federal entities.

                                                                 MWTG-SPP Footprint

                                                                 MWTG-SPP Footprint


Presenters highlighted the 5 phases of integration: (1) initial discussions, (2) due diligence and membership agreement discussions, (3) open-access transmission (“OAT”) tariff negotiations (which includes proposal and modification of governing documents like bylaws), (4) FERC and state approval, and (5) actual integration. The parties are now engaged in phase (2) and (3), which is has been slow between the 95 SPP stakeholders.  MWTG and SPP have set a tentative date for full integration by October 2019.  They also referenced the website created to provide information on the integration process and briefly outlined how members, customers, market participants or regulators could submit questions, commentary, and suggested revisions to the tariffs and governing documents.

Members of SPP and MWTG also presented an outline of the proposed transmission plan. They first explained “pancake pricing,” and the consequences of eliminating pancakes in an RTO. Pancake pricing occurs when a transmission customer is charged separate access charges for each utility service territory crossed by the transmission customer's power transaction. “Pancaking” increases the price of electricity and discourages competition in the generation sector. By combining transmission systems under a single RTO like the SPP, a wider area served by a single rate can be designed, thus eliminating pancakes. However, this elimination will generate cost-shifts across the MWTG region, and the parties are still negotiating the terms of the agreement around mitigation of these cost-shifts.

The presenters also emphasized that under the SPP, project selection will alter to consider a broader scope of benefit.  While local planning will remain important, SPP will also perform a regional evaluation (for the east and west, respectively) of each proposed project to determine their overall costs and benefits to that region. Thus, a project that has a large benefit locally, but little benefit regionally, may not be approved under SPP protocols when compared to a project with less local benefit but a greater overall benefit. The SPP will also introduce a new model for cost allocations of such projects as well, which will scale costs related to local and regional benefits and project size. The parties continue to negotiate on the details, but the presenters assured that the project selection and cost allocation processes will not include those projects that are necessary to ensure transmission reliability in the region.

The parties also discussed governance models under the SPP. MWTG’s primary change to the SPP model would be to include more seats on the boards and working groups so that Colorado’s west slope would be adequately represented in the decision-making process. For example, certain deal terms would require consent from western transmission owners by majority vote before they could be changed, and western transmission owners would have more input on proposals that would alter the nature of the RTO.

Representatives also presented on the upcoming regulatory issues related to FERC and state filing of MWTG’s application to join the SPP.  The projected filing deadlines were all based the October 2019 integration rate. Given the importance of the FERC process and its potential to confront and resolve application issues that would arise at the state level, the MWTG decided to file with FERC first before going to the state, so that the federal processes and outcomes could be incorporated into the state filing. The MWTG mentioned that its discussions with FERC are still mostly informational, but that this filing will be one of the most significant to come to FERC in recent memory due to its size and its multi-jurisdictional aspects. FERC has expressed preliminary concerns with the transition process as well as its ability to issue compliance orders to the SPP. 

MWTG closed by highlighting their bottom line: despite the costs, the process represents a diverse and broad perspective of entities seeking integration, which demonstrates its value.  MWTG also identified its next steps: namely, the filing processes with the FERC, future meetings related to the integration and its ability to uphold Colorado’s constitutional mandate to expand renewable energy, and the state and the issuance of a detailed cost-benefit analysis.

Much of the integration process remains in its planning stages, and the information provided here is also subject to change as the parties continue negotiations and formalize their filings for both FERC and the PUC. However, a number of up-to-date resources are available, listed below:

The Mountain West Transmission Group Initiative

The October 2017 Information Session Presentation  

SPP-MWTG Stakeholder Package

Submitted by: Rebecca Boyle

Staff Introduction - Meet Susan J. Armour

Susan (“Sue”) Armour is a highly experienced paralegal at Dietze and Davis, P.C., and currently works with our Domestic Relations and Family Law group.  Sue began her career as a paralegal in 1979, working for eight years at a firm in Nebraska before moving to Colorado.  She also has experience working in the area of civil and general litigation.  Married to Tom Armour for almost 40 years, Sue is the proud mother of two daughters, Amy and Andrea, and four granddaughters, Melissa, Mila, Sloan and Bryn.  When away from work, Sue enjoys knitting, scrapbooking, reading, and the occasional trip to the casino.

Read More

Colorado Supreme Court Formally Adopts New Pleading Standard

On June 27, 2016, the Colorado Supreme Court decided Warne v. Hall, 353 P.3d 588, and in so doing adopted the “plausibility” standard for state district court pleadings, bringing the pleading standard under C.R.C.P. 8 in line with its federal counterpart.   Originally, Hall brought a claim for intentional interference with contract against Warne in Colorado district court.  Warne moved to have the claim dismissed for failure to state a claim upon which relief could be granted pursuant to C.R.C.P. 12(b)(5).  The district court granted Hall’s motion and dismissed the case.  The Court of Appeals reversed, finding that Hall’s complaint was sufficient under the “no set of facts” pleading standard that has long been applied by Colorado courts.  The Colorado Supreme Court reversed the Court of Appeals and adopted the “plausibility” standard applied in federal courts.

 The “no set of facts” standard states that a complaint should not be dismissed for failure to state a claim unless it appeared beyond a doubt that a plaintiff could prove no set of facts in support of his claim that would entitle him or her to relief.  As noted, the Court of Appeals felt bound by this standard in Warne v. Hall because it has been the standard in Colorado for more than 50 years.

 The “plausibility” standard requires that in order to survive a motion to dismiss, the factual allegations of a complaint must raise a right to relief above the speculative level, and provide plausible grounds that the complainant is entitled to relief.  This standard has been the standard for pleadings in federal court since the U.S. Supreme Court decisions Bell Atlantic Corp. v. Twombly (2007) and Ashcroft v. Iqbal (2009).

 In discussing whether to expressly adopt this standard, the Colorado Supreme Court noted that it had always considered it preferable to interpret the Colorado Rules of Civil Procedure harmoniously with its understanding of the similarly-worded federal rules.  The Court explained several benefits of this philosophy, including the desire to promote confidence in the judicial process and the objective interpretation of codified law, making the transition between practicing in state and federal court easier for practitioners, and preventing forum-shopping that results from different forums using different rules.

 In addition, the Court found that adopting the “plausibility” standard would not be a meaningful departure from the “no set of facts” standard because, even if the no set of facts standard had been met in some cases, courts had been known to still dismiss allegations that were too conclusory, or when the court simply found that a claim was insufficient because it merely asserted a theory without alleging facts which, if proved, would satisfy the elements of the claim.

 Perhaps most importantly, the Court noted that adopting higher standard for initial pleading would likely assist in weeding out groundless complaints in the early stages of litigation.  By holding complainants to this higher standard, courts would achieve the very desirable goal of expediting litigation and avoiding unnecessary expenses.  A problem with the “no set of facts” standard was that a complainant could often resist a motion to dismiss by merely alleging unsupported or conclusory facts that, if assumed to be true, would entitle them to relief.  Then, the complainant could utilize the slow, costly discovery process to determine whether a factual basis actually existed for the claim.

 So what does the Warne decision mean for practitioners in Colorado and their clients?  Clearly, the standard has been changed, but what effect does it actually have on the litigation process?

 The distinction, as the Court put it, is that the “no set of facts” standard permitted the complainant to rely on the compulsory process available to civil actions to discover whether grounds for the action exist, and the “plausibility” standard bars such reliance without being able to first allege plausible grounds for relief.  In other words, complainants will not be permitted to simply state facts that, if true, would entitle them to relief and then rely on the discovery process to prove up their claims.  Rather, they must now not only allege facts that, if true, would entitle them to relief, but also ensure that the facts as pled show that it’s actually plausible that they’re entitled to relief.

In practice, this means practitioners should, as much as possible, avoid making conclusory allegations disguised as facts and ensure to provide a specific factual basis that entitles their client to relief.  In Warne, for example, the Supreme Court found that Hall’s claims were insufficiently pled because he relied on conclusory allegations and allegations that if true, would not be considered improper conduct (a necessary element for an interference with contract claim).  Since conclusory allegations are not entitled to a presumption of truth, and because Warne’s conduct as alleged did not rise to the level of impropriety, the Court concluded that Hall’s claims, as pled, did not allege plausible grounds for relief—even if they would have satisfied the “no set of facts” standard.  Practitioners should avoid pleading conclusory and unsupported allegations anyway, but it is now clear that Colorado courts will be reviewing claims with greater scrutiny and placing a greater burden on the complaining party.  Practitioners seeking to dismiss insufficiently-pled claims should, conversely, look forward to facing less resistance in seeking to have those claims thrown out.  Finally, practitioners can hopefully look forward to avoiding the time, cost, and frustration of litigating unsupported and groundless claims.

Submitted by:  Nathan A. Klotz

House Bill 16-1165 Regarding Child Support To Go Into Effect January 1, 2017

House Bill 16-1165 will usher in some changes to Colorado’s child support statutes, C.R.S. §14-10-115 and C.R.S. §14-10-122 effective January 1, 2017.

The bill expands child support enforcement agencies’ ability to lien and attach assets to collect past due child support.  Specifically, C.R.S. §14-10-122(1.5)(c) and C.R.S. §26-13-122 permit child support enforcement agencies to issue a notice of administrative lien and attach any insurance claim payments, awards, or settlements due to an obligor who is responsible for past due child support. 

H.B. 16-1165 also expands the enumerated factors a Court can consider in determining whether a deviation from the child support guidelines is appropriate.  Effective January 1, 2017, the court can consider whether one parent spends substantially more time with a child than is reflected by a straight calculation of overnights, in determining whether the application of the child support guidelines would be inequitable, unjust or inappropriate. 

Changes to C.R.S. §14-10-115(14) will require parties to exchange information relevant to child support calculations at least once per year, for the purpose of updating and modifying child support, unless the Court orders otherwise.  The change to this section makes an annual exchange of financial information to review child support orders information mandatory, absent an order of the Court.

One other substantive change that will be effective January 1, 2017 relates to retroactive child support.  Specifically, the court’s ability to retroactively modify child support, based on a mutually agreed upon change of physical custody, will be limited to five years prior to the filing of a motion to modify child support.  The court does retain the power to disregard the five year prohibition on retroactive child support if the court finds that doing so would be inequitable, unjust or inappropriate.

Submitted by:  Tucker M. Katz