11/01/2011 04:23 pm ET Updated Jan 01, 2012

San Luis Valley 'Southern Colorado Transmission Project' May Be Cut By Xcel, Tri-State, After Demand Falls

A proposed powerline that had been billed as a referendum on Colorado's 'New Energy Economy' may be on the chopping block Tuesday after Xcel Energy downgraded their expected electrical demand through 2018.

The 150-mile 'Southern Colorado Transmission Project' has been mired in controversy since its proposal in 2009. Designed to funnel 900 megawatts of solar power from the Comanche solar power plant in Pueblo, over the Sangre de Cristo Mountains to Alamosa, the line was hoped to validate the valley's solar production capabilities. Advocates touted the ability to export power back out of the San Luis Valley as solar power production expands in the state.

Opponents include environmentalists (who dispute the powerline's path), rival power companies, and--most notably--billionaire hedge fund guru Louis Bacon (who owns the majority of the land the powerline would cross). Bacon promised to sue after the Colorado Public Utilities Commission approved the line this year.

Speaking with the Colorado Independent, however, Bacon countered he has been scapegoated by Xcel in an effort to obscure the real issues with the line. Bacon told the paper Xcel seemed willing to risk the public's money but not its own.

"No one that we've ever worked with has done this kind of legal counsel, in the depth and breadth that they have," said Robert 'Mac' McLennan, an executive at Tri-State, to the Denver Business Journal of Bacon in 2009.

Further complicating matters, an administrative law judge's ruling in 2010 recommended approval of the line only if it would generate 700 megawatts of electricity within 10 years. If not, Xcel would have to refund taxpayers half of the money it collected to install the line in the first place.

The line was expected to cost Xcel and Tri-State, its partner in the project, $180 million.

After demand projections through 2018 were decreased from a 2010 estimate of 1,000 megawatts to 292 megawatts, Xcel dropped the proposal. A Denver Post report also adds that federal tax incentives for wind and solar projects will expire in the next four years, further decreasing appetite.

In a statement, Xcel's Colorado-based Public Service Co. CEO David Eves said, "We are well positioned to continue providing our customers with clean, reliable and affordable power without making any more significant generation investments through this planning period." The company also added 30 percent of its power will be sourced from renewable energy prior to a 2020 mandate.