UTILITY MONOPSONY REGULATION: WHAT’S BEHIND LOW-COST WIND AND SOLAR BIDS IN COLORADO?

This policy brief analyzes how the Public Service Company of Colorado (PSCo) achieved low-cost wind and solar bids through a competitive procurement process that mitigated the utility's monopsony market power. The author argues that these results were the product of long-term regulatory oversight, transparent planning, and a structured approval process by the Colorado Public Utilities Commission (PUC).

• Public Service Company of Colorado (PSCo) achieved median bid prices for new renewable energy that were significantly lower than the marginal costs of its existing coal plants, with wind at approximately $18 per megawatt-hour (MWh) and solar at approximately $29 per MWh.
• Vertically integrated monopoly utilities possess monopsony power as single buyers in the market for new electricity resources, which they may use to disadvantage suppliers to maintain market control and shareholder earnings. Tactics include obfuscating planning needs, using inconsistent bid evaluation criteria, and utilizing confidentiality to hide information.
• To mitigate utility monopsony power, the author recommends several regulatory oversight measures, including opening planning to public scrutiny, requiring the filing of draft requests for proposals (RFPs) and power purchase agreements (PPAs) during planning, and employing independent evaluators to oversee the bid process.
• Colorado's regulatory model links utility planning directly to resource acquisition through a two-phase commission approval process. The first phase ratifies planning methods, RFP terms, and bid evaluation procedures; the second phase ratifies the recommended resource portfolio, creating a rebuttable presumption that the resulting actions are prudent for consumer rate inclusion.
• Utility ownership of generation and competitive bidding can coexist without foreclosing market competition. Allowing utilities to successfully bid for or co-own projects helps them maintain equity earnings and avoid 'hollowing out the rate base' while still benefiting consumers from competitive pressure and new technologies.

APA

LEHR, R. (2019). UTILITY MONOPSONY REGULATION: WHAT’S BEHIND LOW-COST WIND AND SOLAR BIDS IN COLORADO? Energy Innovation. https://energyinnovation.org/wp-content/uploads/Monopsony-Brief_December-2019-2.pdf

Chicago

LEHR, RON. UTILITY MONOPSONY REGULATION: WHAT’S BEHIND LOW-COST WIND AND SOLAR BIDS IN COLORADO? Energy Innovation, 2019. https://energyinnovation.org/wp-content/uploads/Monopsony-Brief_December-2019-2.pdf.

Wikipedia

{{cite report |last1=LEHR |first1=RON |title=UTILITY MONOPSONY REGULATION: WHAT’S BEHIND LOW-COST WIND AND SOLAR BIDS IN COLORADO? |publisher=Energy Innovation |date=December 2019 |url=https://energyinnovation.org/wp-content/uploads/Monopsony-Brief_December-2019-2.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lehr2019utility, author = {LEHR, RON}, title = {{UTILITY MONOPSONY REGULATION: WHAT’S BEHIND LOW-COST WIND AND SOLAR BIDS IN COLORADO?}}, institution = {Energy Innovation}, year = {2019}, month = dec, url = {https://energyinnovation.org/wp-content/uploads/Monopsony-Brief_December-2019-2.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }