YVEA, Xcel fight headed for FERC

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Last-minute negotiations meant to settle a case between Yampa Valley Electric Association and Xcel Energy did not produce an agreement in time to avoid a costly and cumbersome trip to Washington, D.C. to debate the matter before the Federal Energy Regulatory Commission.

YVEA joins several other utilities in Colorado claiming Xcel improperly applied rates through fuel cost adjustments it passes onto its customers, according to Mark Stutz, an Xcel spokesperson.

"My understanding of their (YVEA and other utility companies) position is that this might have been as much as $50 million or $60 million since 1996," Stutz said.

"Obviously, we don't agree with their contention that we misapplied the rates for the fuel cost adjustment. But we do recognize that there is some possible exposure on our part in terms of how we did apply those rates."

Xcel passes the higher cost of the electricity produced by gas turbines to YVEA in the form of a monthly fuel cost adjustment, according to YVEA.

The co-op disputes the fuel adjustment costs Xcel reported, which caused YVEA in 2002 to begin adding pass-through charges to its customers' monthly statements. YVEA maintains that Xcel is reporting as fuel adjustment costs expenses not allowed under FERC rules, including non-fuel operating and maintenance costs and money spent hedging against gas prices.

The local utility negotiated a rate case in 1996 in what YVEA President and General Manager Larry Covillo calls a "black-box settlement" in which YVEA and Xcel were able to agree on a rate in the settlement phase before a 1996 FERC hearing.

According to Covillo, Xcel now wants to open that black-box settlement to correct an error it made in the 1996 rate case and use the corrected numbers to "offset" the disputed fuel adjustment costs.

"FERC has never done that, by the way," Covillo said.

Covillo said if Xcel does open the black-box settlement to recalculate mistaken numbers, YVEA will expect them to correct all the errors, not just the costs in favor of Xcel.

"We're saying that if you're going to open it, we're going to open it for all the errors, and we'll offset everything. That's a considerable amount of money," Covillo said.

Xcel and YVEA would like to have settled the case before a FERC hearing. Covillo said YVEA proposed a "global settlement" that would have tied the fuel adjustment case to this summer's rate disputes and negated the need for a FERC hearing. As of press time, Xcel had not agreed to the settlement. The two were scheduled to go before FERC at 10 a.m. eastern time today.

The good news for the local utility is that Xcel filed an amended rate case Aug. 1 showing a $324,000 rate decrease for YVEA. Originally filed in June, the rate case called for a 5 percent increase of wholesale electricity rates for YVEA. After YVEA discovered an $80 million error in Xcel's accounting, Xcel amended the filing. The resulting rate came out in favor of YVEA.

Though no settlement has been reached in the fuel cost case, Xcel's spokesperson said negotiations would continue. "It is our desire and our history to pursue settlements," Stutz said.

Jeremy Browning can be reached at 824-7031 or jbrowning@craigdailypress.com.

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