PHOTO: State Senator Steve Fenberg listened during a bill-signing ceremony in Boulder as Colorado Governor Jared Polis made a point. Photo by Allen Best.
This story by Allen Best appeared on Big Pivots on February 6, 2023. We are sharing it in two parts.
People have been stomping mad about the bills from Xcel Energy that, in many cases, doubled in November and December compared to the previous years. Will this outrage spur tweaking of the relationship between consumers and Colorado’s largest utility — or even trigger a wholesale revamping of that relationship?
The evidence – if still a bit fuzzy – for a more decisive revamping came on Sunday, after this story was substantially written, when Governor Jared Polis got price space in The Denver Post to announce a list of measures in concert with several state agencies and the utilities.
He fell short of spelling out long-term policies of consequence, but he did hint at multiple possibilities with this statement: “We simply must end our reliance on costly fossil fuels and improve energy security.”
My take-away? He is saying “hurry-up, hurry-up” to building decarbonization.
Several days before, a substantial recalibration was suggested in a Boulder County forum on January 31 when Colorado Senate President Steve Fenberg was asked about the rate increases. The cost of natural gas was the main problem, he answered. He suggested that this will provide a strong argument for accelerating the transition to renewables.
He did not say it, but this would seem to leads one into a discussion about the pace of decarbonization of buildings.
Then there’s Xcel’s business model, a regulated utility that has a monopoly within its service territories. It has 1.5 million electric customers and 1.4 million gas customers in Colorado.
The relationship between the monopoly utility and consumers is mediated by the state through the Public Utilities Commission. This hews to the compact forged more than a century ago by Samuel Insull in Chicago. Investor-owned utilities get assured profits, but state regulators hold them in check.
That’s the theory, and it’s worked well enough. Always there are questions about the balance between corporate interests and consumer interests. In this case, we have a giant increase in natural gas prices at a time that the company has been delivering giant returns to its shareholders.
Anguish and anger have erupted. One fundamental question, as Fenberg said during the Zoom gathering of three legislators sponsored by Empower our Future, is whether Xcel “needs more skin in the game.”
In describing the “bigger structural problems” with utilities, he said they “figure out how to nickel and dime people” even as the company’s profits have risen to record levels during a time that people have struggled to pay their bills.
“The business model for them, of continuing to pass their costs off to their customers, won’t work anymore. There will be continued volatility (in the natural gas market). They need to have some skin in the game. They need to be involved more in the market and hedge at times.”
As utilities advance into renewables, as required by state law, the less risk there will be from the volatility of the natural gas market.
As his daughters made cameo appearances, Fenberg suggested the need for measures “so that consumers are not on the hook for investments made by utilities.”
State Rep. Judy Amabile, who was also on the Zoom session, suggested that PUC members need to adjust the line between company and consumer interests.
“We need to be more careful about the PUC and what they are charged with doing. That balance needs to flip a little more to protect consumers. It does not seem like they have leaned in that direction as much as they should.”
Neither explicitly suggested that legislation will be forthcoming that will tweak the regulation of Xcel.
On Saturday, State Sen. Chris Hansen, told me that he had consulted with Fenberg about legislation that will require both hedging and securitization by Xcel and other utilities to avoid giant pass-through costs as occurred here.
Earlier on January 31, before the Boulder County Zoom session, the PUC commissioners had heard from 50-plus individuals, their testimony filled with anger and angst. The next morning, at the weekly meeting of the PUC commissioners, Eric Blank, the chair, described what they heard as a “bit of a wakeup call. I think there are a lot of customers struggling now, (and) we didn’t have the answers to some basic and legitimate questions.”
Blank outlined specific concerns, first being the potential for a tsunami of disconnects as Xcel customers fall behind in their bills.
Another annoyance expressed in the session has been Xcel’s laggard pace in hooking up people with rooftop solar.
Even more piercing had been the testimony, described by Blank as “sort of unbelievable,” of customers on” life-support systems freezing in the dark because they couldn’t pay for the energy.” Their testimony, he added, poses the question of “how we as a community provide for those types of customers.” It was becoming clear, he said, that needs extended “beyond income-qualified customers into moderate-income customers.”
“I sensed a level of frustration I have never seen before. We have a lot of work to do,” said John Gavan, a commissioner serving his last week of a four-year term.
Megan Gilman, the third commissioner, expressed some frustration, too—and in response to statements from a utility. She objected to comments made by the utility that described natural gas as the “most reliable and cost-effective way to heat your home.” The affordability, as had been documented in a presentation to the PUC commissioners a week before, was “primarily driven by high gas costs. Period,” she said. She called the statements—she did not identify which of Colorado’s four investor-owned natural gas utilities had said this—confusing, potentially misleading, and fundamentally unhelpful.
The next afternoon, the PUC commissioners heard more unhappiness. It was a listening session about Xcel’s demand-side management and beneficial electrification strategies. Some speakers took the opportunity to vent about Xcel.
“They’re greedy,” said Elizabeth Smith of Wheat Ridge.
Kim Lynsobey also accused Xcel of greed — and the PUC of being accomplices.
“There is a special obligation of the PUC to protect us from monopolies. They have the ability to gouge.” She then drew attention to reports of the company’s record profits, more than $525 million in Colorado alone, and the income of the chief executive. “This is real greed at our expense.”
She also blamed Gov. Polis for his appointments of the PUC members. “You allowed (Xcel) to pass along the result of its bad decisions to customers, and we are now carrying a pretty significant line item in our bills. And that will be there for awhile.”
Others stuck more closely to the topic du jour but were critical of Xcel and its business motives.
“In terms of demand-side management plans, if you asked 100 policy experts and engineers, you would get 100 different plans,” said Paul Culnan of Boulder. “Call me a cynic, but I think Xcel would choose the one that maximizes their profits.”
Leslie Glustrom, also of Boulder, told the commissioners that they have “all the authority you need to initiate proceedings to ask the question of whether Xcel should be held virtually harmless, no skin in the game, for Storm Uri.”
We will get back to Storm Uri, but first the advance warning about higher utility bills,
“Utilities are paying more for natural gas, which means many Colorado customers will see higher bills starting Oct. 1″, the Denver Post reported somewhat cautiously in September.
In November, Vox explained in “Why Americans will pay higher natural gas prices this winter” that the United States had been exploring more natural gas, and not just because of the war in Ukraine. “Now that the U.S. is increasingly at the whims of the global market, the pitfalls of running an economy on gas are becoming more obvious.”
But not everything could be foreseen, as was demonstrated in a deconstruction of a generalized bill of an Xcel customer by Erin O’Neill, chief economist at the Colorado PUC, and Gail Conners, chief of media relations for the PUC, at the PUC’s January 25 meeting. Examining a bill for a typical Xcel customer in December 22, they found that electric bills have increased 25% from the year prior and gas bills 75%.
They also found that four-fifths of the combined increase came from the gas bills. Natural gas prices — what some people prefer to call methane, the primary constituent — are most of the story. Here’s how it breaks down:
Natural gas prices
After years of being low, prices ratcheted up 40%, according to the January presentation by the PUC staff. These highest natural gas prices were responsible for 35% of the higher bills this winter.
(In January, Xcel announced that because of a drop in natural gas wholesale prices, customers would pay an average $18.19 less in February although the cost of gas remains higher than in recent years.)
Colder weather
It has been the coldest winter since 2000-2001 in thermometers at Denver’s Central Park, where temperatures have been monitored since the 1930s when the airport called Stapleton was established there.
Russ Schumacher, the Colorado climatologist, says the temperatures from November-January were 8 degrees colder than the same period last year—which, by the way, was the second warmest in the history of the station.
One way of illustrating this is through something called heating degree days, a measurement designed to quantify the demand for energy needed to heat and cool buildings.
“There were 30% more heating degrees days from November through January this year than the year before,” he explained via e-mail to Big Pivots.
“So weather can’t explain a doubling of people’s bills, but it does explain a pretty substantial part of the increase.”
Xcel reported that its customers used 35.5% more gas in November than they did in November 2021. In December, it was 31% more.
Useful, too, is understanding the longer-term trend. Just once in the last 30 years, in 2000-2001, have these winter months been colder. It was 3.7 degrees colder than the average of those three decades.
Go back further, and cold was more common. The period from 1949 to 2001 had seven three-month periods colder than this year, or one roughly every seven years.
“We’ve probably started getting used to the warmer winters of the last several years, so the extended stretches of cold weather we’ve experienced this winter feel especially harsh,” he said.
In northeastern Colorado, which has had even more snow, it’s been even colder — the chilliest since 1992-1993.
Storm Uri
Then there’s the aftermath of Storm Uri, the week of deep cold in February 2021 that swelled demand across the continent’s interior from Texas to Colorado and points beyond. Xcel, perhaps lulled from more than a decade of reliably low gas prices, had not hedged and paid through the nose for gas, both for heating use and for production of electricity. Winds died during the cold spell.
The company was permitted to pass along most of the increased costs to consumers, which have started showing up on bills now, explaining 11% of the higher costs, according to the analysis by the PUC’s O’Neill.
Base rates
This is basically Xcel’s overhead for fuel delivery. In the case of gas, it was 5%.
Electric rates
Electric rates were 20% of the total bills, and they were also split among effects of Storm Uri, base rates, and weather causes. Fuel costs, though, were only 2% (EGCRR, or extraordinary gas cost recover rider for Storm Uri) — a stark contrast to the natural gas portion of the pie seen above…
Allen Best publishes the e-journal Big Pivots, which chronicles the energy transition in Colorado and beyond.