Government Gone Wild: Electricity Edition

Here's a perfect example of what happens when government tries to control an industry.

The hard fact for ratepayers is that the Black Hills rate hike was sought and granted to help pay for a $478 million power plant north of Pueblo that was only needed because Public Service Company of Colorado (Xcel Energy) canceled its long-standing agreement to sell power to Pueblo's electric utility over the years. Now that Black Hills has built its new plant, Xcel is citing the loss of its Pueblo customers as a major reason the PUC should grant it a major rate increase.

This is a bit confusing so let's see if I can sort this out.

1. Black Hills provides power to parts of Pueblo.
2. It did that, in part, by buying power from Xcel.
3. Xcel arbitrarily canceled a contract to sell power to Black Hills.
4. Black Hills built a new power plant so that they could continue to serve their customers.
5. Xcel is asking the PUC for a rate increase because they are no longer selling power to Black Hills.

Isn't that pretty? Oh, wait, it gets better.

That irony isn't lost on the PUC staff, which filed a sharply worded recommendation last week urging the three-member commission to reject Black Hills request to add a third, $100-million LMS 100 turbine to its new Pueblo plant — a cost that largely would be passed along to ratepayers.

The PUC staff says in its analysis that Black Hills should purchase any needed additional power from Xcel Energy, not add another major turbine.

Black Hills tried that and Xcel arbitrarily cut them off. Being forced to buy from your competitors really sucks. Black Hills needs more capacity so it wants to build a new plant to provide it but here comes the government saying, "Nope. You can't do that. Why don't you go buy power from the guys who cut you off in the first place." I don't blame Black Hills in the least from wanting to stay away from Xcel. As a side effect, Black Hills is unable to grow and provide real competition to Xcel. The PUC is ensuring the Xcel's monopoly remains intact.

Adding to the fun, Black Hills is shutting down a coal plant. The new plant would take that load as well as provide the added capacity. Do you remember the state Assembly passing legislation a couple of years ago requiring most of the coal plants in the state to be converted to natural gas? This would do that as the new turbine that Black Hills wants to use is gas fired.

It's not just the PUC that wants to prevent the construction of the new plant.

This Black Hills case is being watched by closely by groups ranging from the Colorado Gas Association, which is an advocate for the use natural gas-fired turbines like the LMS 100, to the Colorado Independent Energy Association, which is made up of independent power producers. That trade group wants the PUC to require Black Hills to purchase electricity from existing plants, not build more capacity.

A group of energy companies wants to force their competition to buy power from them them rather than build their own plant. The PUC has the power to make that happen. It sounds so much like the laws passed in "Atlas Shrugged" that I beginning to wonder if the Black Hills leadership will spike their generators and disappear.