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

The document analyzes the success of Public Service Company of Colorado (PSCo) in achieving low-cost renewable energy bids through a regulated competitive procurement process. It argues that utilities, as single buyers (monopsonies), have incentives to disadvantage suppliers to maintain market control and financial advantages. To mitigate this, the author proposes specific regulatory measures—such as public planning scrutiny, independent bid evaluators, and the filing of draft requests for proposals—that were implemented by the Colorado Public Utilities Commission (COPUC). The brief concludes that utility ownership and competitive bidding can coexist if the process is transparent and linked to approved resource plans, ensuring consumers benefit from current market prices for wind and solar.

• Public Service Company of Colorado (PSCo) achieved median bid prices for wind of approximately $18 per megawatt-hour (MWh) and solar of approximately $29 per MWh, which were significantly lower than the marginal costs of many of its existing coal plants.
• Vertically integrated monopoly utilities possess monopsony power as the sole legal electricity suppliers, creating incentives to obstruct competitors through tactics such as obfuscating planning needs, using inconsistent bid evaluation criteria, and maintaining secret or unclear power purchase agreements.
• To counter utility monopsony power, the author recommends several regulatory interventions: opening planning to public scrutiny, requiring the filing of draft requests for proposals (RFPs) and power purchase agreements (PPAs), holding documented bid conferences, and employing independent evaluators.
• Colorado's regulatory model links utility planning to resource acquisition through a two-phase commission approval process. The first phase ratifies planning methods and RFP terms, while the second phase ratifies the recommended resource portfolio, creating a 'rebuttable presumption' that the utility's actions are prudent.
• Utility ownership of generation assets can coexist with competitive bidding if utilities are required to bid successfully or acquire projects on reasonable terms, allowing them to maintain equity earnings for shareholders without foreclosing competitive pressure from independent power producers.

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} }