Members of a joint legislative committee investigating why Colorado utility bills shot up so dramatically this winter have proposed a bill meant to protect customers against future price shocks and level what some see as a playing field tilted in the utilities’ favor.
The bill, introduced Wednesday and sponsored by Democrats on the committee, proposes the short-term solution of setting a cap on how much of a regulated utility’s increased fuel costs it could pass on to customers. Regulators could spread out the costs over a period of time.
Regulated utilities pass through wholesale fuel costs to customers without a markup. Legislators have suggested the companies might have more incentive to seek the lowest prices if they weren’t assured of recouping all their costs.
Longer-term proposals include a study to determine whether new investments in natural gas facilities will saddle ratepayers with expensive plants and pipelines they won’t need as power increasingly comes from renewable energy sources. A study would also explore whether current customers will end up subsidizing new development that relies on natural gas.
“This attempts to level the playing field at the (Colorado) Public Utilities Commission,” said Senate President Steve Fenberg, a Boulder Democrat and chairman of the Joint Select Committee on Rising Utility Rates.
However, Xcel Energy, Colorado’s largest utility, and Black Hills Energy said the bill won’t do what it is intended to do: cut and stabilize costs.
Xcel Energy-Colorado President Robert Kenney said the company was ready to collaborate after Gov. Jared Polis called on state agencies, lawmakers and utilities to respond to the soaring heating bills that were straining people’s budgets. He said in its current form, the bill “doesn’t hit the mark.”
“I would actually go so far as to say as it’s currently composed, it’s fatally flawed,” Kenney said. “To the extent that it injects uncertainty or creates a more complicated and hostile regulatory environment, it could serve to discourage investments and economic development in the state.”
Black Hills Energy opposes the legislation “because it does not address concerns with energy costs, would lead to higher costs to customers and hinder progress toward Colorado’s clean energy goals,” the company said in an email.
The legislative committee introduced Senate Bill 23-291 after hearing from customers, advocates and utilities about heating costs that skyrocketed across the state in November, December and January. Many bills doubled or tripled from the previous year and agencies that help people with their energy bills were swamped by calls and applications for assistance.
Colder weather and high wholesale natural gas prices drove much of the increases customers were seeing, Public Utilities Commission staffers said. But customers and advocates raised concerns about the impacts of recent rate increases. They questioned why utility bill costs were spiking as Xcel Energy reported expanding profits.
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.
Critics have objected to the expenses that utilities are allowed to recover from ratepayers when they seek approval from the PUC for gas and electric rate increases. The Colorado Office of the Utility Consumer Advocate is suing over a decision allowing Xcel to recover $2 million in outside expenses for a rate case in which the company won approval of a $64.2 million increase in natural gas revenue.
The legislation would require the PUC to adopt rules limiting the amount of rate-case expenses that investor-owned utilities like Xcel Energy and Black Hills Energy could recover from customers. Lobbying to influence the outcome of ballot measures and certain advertising and public relations costs are among the expenses that utilities couldn’t recoup from ratepayers.
“I think for any average person it seems a little perverse to have a utility make the case to raise rates and then get to use ratepayer money to make that case,” Fenberg said.
During the select committee hearings, lawmakers questioned whether the century-old model of how regulated utilities operate should be restructured.
Regulated utilities are essentially monopolies that are expected to provide reliable service at a reasonable cost to people in certain geographical areas. In return, they can recover the costs of building power plants, transmission lines and other expenses while making a certain amount of profit.
“This legislation makes sure that Coloradans aren’t inadvertently incurring the costs of connecting new buildings to the gas system, particularly when all-electric new buildings are cheaper, healthier and a key part of meeting our climate goals,” Meera Fickling with the Boulder-based environmental group Western Resource Advocates said in a statement.
Fenberg said he foresees “robust debate” on the bill and expects it to be amended, but believes it will be approved. “There might be some areas we need to kick down the road and address in the interim or next January.”
Kenney said Xcel Energy remains committed to finding solutions to meeting customers’ needs. He said the utility has proposed more storage space so it can buy more natural gas when it’s less expensive; longer-term contracts; and greater financial hedging.
Xcel has also proposed multi-year rate increases, which Kenney said would reduce the number of rate cases it files and provide more certainty. He said the company recently filed a proposal with the PUC to add $47 million to programs to help customers with bills.
“We remain willing to propose solutions and if that’s through the amendment process, we stand ready to offer ideas and ways that we think this bill could be salvaged and improved,” Kenney said.
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