UTILITY FINANCIAL TRANSITION IMPACTS: FROM FOSSIL TO CLEAN

This briefing by Energy Innovation examines the financial mechanisms available to regulated investor-owned utilities to transition from fossil fuel generation to clean energy. Using Colorado as a case study, the document outlines a three-step process for analyzing the marginal cost of energy (MCOE), managing the financial impacts of early coal plant retirements, and utilizing refinancing tools like debt-for-equity swaps and securitization to balance the interests of consumers, investors, and impacted communities.

• In many parts of the United States, the cost of operating existing coal generation now exceeds the total cost of replacing it with wind and solar energy.
• Financial analysis using publicly available data from the Federal Energy Regulatory Commission (FERC), the Department of Energy's Energy Information Administration, and the Securities and Exchange Commission can be used to determine plant-level marginal cost of energy (MCOE), providing a more reliable alternative to proprietary utility-led production cost modeling.
• In Colorado, financial analysis of Public Service Company of Colorado (PSCo) power plants indicated that the MCOE for most of its coal fleet was higher than the cost of new wind power, which was estimated at $25 per megawatt-hour (MWh) including the federal production tax credit.
• Early retirement of coal plants creates financial tension because utilities earn returns on equity invested in generation plants; retiring these assets early leaves undepreciated plant balances that utilities seek to recover as 'regulatory assets'.
• Two primary refinancing mechanisms can reduce the cost of holding regulatory assets: debt-for-equity swaps, which replace high-cost shareholder equity with lower-cost corporate debt, and securitization, which uses ratepayer-backed bonds to achieve a lower overall cost of capital.
• To ensure a 'just transition,' savings from fuel and refinancing can be used to support affected workers and communities; for example, proposed Colorado legislation directed 15 percent of securitized bond totals toward mitigating these transition costs.

APA

LEHR, R. (2018). UTILITY FINANCIAL TRANSITION IMPACTS: FROM FOSSIL TO CLEAN. Energy Innovation. https://energyinnovation.org/wp-content/uploads/From-Fossil-to-Clean-Brief_12.3.18-2.pdf

Chicago

LEHR, RON. UTILITY FINANCIAL TRANSITION IMPACTS: FROM FOSSIL TO CLEAN. Energy Innovation, 2018. https://energyinnovation.org/wp-content/uploads/From-Fossil-to-Clean-Brief_12.3.18-2.pdf.

Wikipedia

{{cite report |last1=LEHR |first1=RON |title=UTILITY FINANCIAL TRANSITION IMPACTS: FROM FOSSIL TO CLEAN |publisher=Energy Innovation |date=December 2018 |url=https://energyinnovation.org/wp-content/uploads/From-Fossil-to-Clean-Brief_12.3.18-2.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lehr2018utility, author = {LEHR, RON}, title = {{UTILITY FINANCIAL TRANSITION IMPACTS: FROM FOSSIL TO CLEAN}}, institution = {Energy Innovation}, year = {2018}, month = dec, url = {https://energyinnovation.org/wp-content/uploads/From-Fossil-to-Clean-Brief_12.3.18-2.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }