All Denver area power plants by the end of 2017 would burn natural gas instead of coal under a package of tentative approvals by the three-member Colorado Public Utilities Commission (CPUC).

Following lengthy hearings that began last Monday, the CPUC gave the green light Thursday to a final piece of Xcel Energy Inc.'s sweeping coal-to-gas switch for several power plants in the state. Xcel, based in Minneapolis, is Colorado's largest investor-owned utility. The utility will receive accelerated cost recovery for its investments.

"I am more convinced than ever we are doing the right thing by taking a coordinated approach," said CPUC Chairman Ron Binz.

The commission has until Wednesday (Dec. 15) to issue a written decision about how Xcel should comply with Colorado's Clean Air-Clean Jobs Act, which targets close to 903 MW of coal-fired power plants in the Denver area.

Considered one of the hallmarks of outgoing Democratic Gov. Bill Ritter, the legislation enacted last April requires Xcel -- the state's largest investor-owned utility -- to replace more than 900 MW of coal-fired capacity with natural gas and alternative fuels (see Daily GPI, April 20).

Xcel is required to reduce nitrous oxide emissions by up to 80% from several Front Range coal plants by the end of 2017, most likely sooner (see Daily GPI, April 1). In a filing to the CPUC in August, Minneapolis-based Xcel offered nine alternatives to implement the mandates (see Daily GPI, Aug. 17).

The plan given a tentative approval by the CPUC is expected to reduce power plant nitrogen oxides by 86%.

At the Denver-area Cherokee coal-fired power plant (717 MW), units 1, 2 and 3 would be shuttered and replaced with one gas plant. The fourth Cherokee coal unit would be replaced with a gas unit. In addition, Xcel's Arapahoe power plant (111 MW), also in Denver, as well as the Valmont coal unit (186 MW) in Boulder, would become gas burners as well.

Also supported by the CPUC is a plan by Xcel to install emissions control equipment at two other coal-fired facilities: the Hayden power plant (446 MW) in northwestern Colorado and the Pawnee power plant (505 MW) in the northeastern part of the state.

Total costs to implement the changes initially was estimated to cost about $1.3 billion, according to Xcel. Average monthly electricity bills for residential and business customers were expected to be about 2.4% a year higher.

America's Natural Gas Alliance (ANGA) Executive Vice President Tom Amontree on Thursday called the CPUC's decision "a groundbreaking step for Colorado's future and one we believe should be considered by communities across the nation. ANGA looks forward to digging into the details, but on its face, the decision will result in substantial new power resources being dedicated to clean burning natural gas.

"This innovative decision to reduce emissions, create jobs and improve Colorado's economy will offer substantial benefits to Coloradans," the ANGA executive said. "CPUC Chairman Ron Binz should be applauded for leading a difficult, but comprehensive review of Xcel Energy's plan and reaching a decision that will advance the state's economy and environment. Xcel should also be praised for its vision and leadership in engaging in this process."

Ritter also was commended by ANGA, as were other bipartisan leaders involved in the effort.

"Thanks to their collective vision, natural gas will make a growing contribution to improving local air quality, adding to the 137,000 Colorado jobs already supported by the natural gas industry and protecting the state's majestic outdoors," said Amontree. "We hope that other states will follow Colorado's lead into the clean energy future with greater use of natural gas."

Ritter noted that "for the past four years, we have established Colorado as a national and international leader in building a 'New Energy Economy'...The capstone to all of this is the Clean Air-Clean Jobs Act, a bipartisan initiative supported by a broad coalition of interests that will again make Colorado a national energy trendsetter."

The Act, said Ritter, "provides the path forward for Colorado to fully transition by 2017 from the largest sources of pollution in the Denver metro area -- delivering healthier air, a steady flow of clean electricity, and a stronger clean energy economy."

However, there may be legal challenges ahead. The Colorado Mining Association and Peabody Energy, which has a coal mine near Oak Creek, CO, opposed the plan.

The CPUC directed staff to research a job training program for affected mining communities that would be financed through electricity rates. The CMA estimates that 200 jobs may be lost because some of the plants being shuttered were Colorado coal customers.

CMA President Stuart Sanderson also said the coal industry is exploring legal action. "This thing is far from over," he told reporters.

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