August 8, 2023 — A water delivery contract in Colorado is the center of controversy between a water supplier and energy provider.
According to the Colorado Sun, Pueblo Water entered into a 60-year “take-or-pay” contract with Xcel Energy in 2005, requiring Xcel to pay for 12,783 acre-feet of water annually for its coal-fired Comanche Generation Station, regardless of whether the water is used. Since 2010, this contract has cost Xcel’s customers nearly $13 million for unused water and could potentially cost another $89 million, according to estimates by the Colorado Public Utilities Commission (PUC).
The contract was originally signed to support Xcel’s $1 billion, 750-megawatt Comanche 3 unit and two existing coal-fired units in Pueblo, which required a substantial amount of water for cooling and generating electricity. The contract terms allowed Pueblo Water to increase the price of the water by 5% a year (though prices have risen on average by 3.8%) and did not prohibit the water utility from reselling any unused water.
Due to problems at its Comanche 3 unit, the generating station never used the full 12,783 acre-feet in any single year between 2010 and 2022, leaving Xcel Energy paying $12.8 million for almost 35,500 acre-feet of unneeded water. This contract represents about 20% of the supplies Pueblo Water provides to customers annually.
The Sun reports that the Comanche 3 unit was plagued with problems. Delays in coming online, leaking steam tubes, running at half capacity in 2011, and more than 700 days of unplanned shutdowns between 2010 and 2022 have exacerbated the issue. Since the PUC report was issued, the unit has suffered over 125 days of additional unplanned shutdowns, leaving Xcel Energy to pay for water even when the unit was non-operational.
While the contract has financially benefited Pueblo Water, it has led to significant extra costs for Xcel Energy and its customers, fueled by both the agreement’s strict terms and ongoing issues with the Comanche 3 unit. Efforts to modify the contract have not been successful, and it continues to be a point of dispute in regulatory and business discussions.
“The Comanche Generating Station, located just east of Pueblo, Colorado. The plant is owned by Xcel Energy. Its three units are coal-fired and have a total capacity of 1,426 megawatts.” Jeffrey Beall, December 2014 via Wikimedia Commons.