Xcel Energy at center of Colorado legislators’ look at high heat bills

The first hearing of a legislative select committee investigating why heating bills in Colorado shot up this winter and what can be done to tamp them down going forward opened Tuesday with the panel’s chairman asking if the longtime system of governing utilities needs to be amended.

Utility customers across Colorado have seen their heating bills spike, many at least doubling from the previous year. Elected officials and regulators have been flooded with complaints and concerns. Agencies that help people who can’t pay their bills have reported large volumes of applications.

High wholesale natural gas prices in December and January as well as bouts of frigid weather were two major drivers of the skyrocketing costs, said staffers from the Colorado Public Utilities Commission and the state Office of the Utility Consumer Advocate.

But Senate President Steve Fenberg, the Joint Select Committee chairman, suggested that some changes might be needed in the model used for more than a century to govern public utilities.

Under what’s referred to as the regulatory compact, public utilities operate essentially as monopolies. The companies are expected to provide reliable service at a reasonable cost to people in certain geographical areas. In return, the companies are allowed to recover their costs of building power plants, transmission lines and other expenses while making a certain amount of profit.

The regulated monopolies, which are for-profit companies, don’t run the same kinds of risks that traditional businesses do, said Fenberg, a Boulder Democrat.

“Have we lost track of truly what is a reasonable and necessary expense to provide reliable safe and clean energy?” Fenberg asked. “I would say if a ratepayer is deciding between paying their heating bill or paying their prescription this month, then yes, something is wrong.”

Perhaps a utility’s shareholders should bear a larger part of the burden, Fenberg added. The committee, made up of three members each from the House and the Senate, will hear from utilities, consumer advocates, experts and others in meetings over the next several weeks.

Erin O’Neill, the PUC’s chief economist, told the committee that high wholesale natural gas rates paid by utilities was a main factor behind customers’ high bills. Although other utilities also faced high costs, O’Neill focused on Xcel Energy because it is Colorado’s largest utility.

Typical gas bills increased about 75% this winter compared to 2021, O’Neill said. Electric bills rose about 25%. Wholesale natural gas prices have recently dropped and Xcel has filed requests with regulators to decrease what it charges customers for the fuel.

Wholesale price decreases or increases are passed through to customers with no markup.

Natural gas use rose in December and January because of weather about 10 degrees colder than the same period the previous year, O’Neill said. Customers also are paying a temporary monthly charge to cover Xcel Energy’s roughly $500 million in expenses from a winter storm in 2021 that gripped a large section of the country from Texas to the Midwest, sending temperatures plunging below zero and natural gas prices soaring.

Another factor is an increase in Xcel Energy’s base rates, which cover infrastructure and other costs.

The consumer advocate’s office, which represents the public in cases before the PUC, has criticized the company for what it says has been an increase in rate hike requests. Joseph Pereira, deputy director of the office, said his agency’s annual budget is about $2 million.

In comparison, Pereira said, Xcel Energy was allowed to recover $2 million in outside expenses from one rate case in which it won approval last year for a $64.2 million increase in natural gas revenue.

The advocate’s office is suing the PUC for approving the expenses, saying the decision wasn’t supported by the evidence.

Xcel Energy, which is based in Minneapolis and serves eight states, reported $1.74 billion in profits for 2022, up 8.75% from 2021. The company’s net profits in Colorado were $727 million, up from $660 million in 2021.

“Utilities come to the table with a dearth of information. They set the playing field in their filings and they have the resources to ultimately land in a position that’s favorable for themselves,” Pereira said.

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