Xcel customers’ bills to increase as regulators back recovery of $500M in storm costs
State regulators voted Wednesday to allow Xcel Energy-Colorado to recover hundreds of millions of dollars from customers for costs from a 2021 winter storm, but knocked $8 million from the $508 million sought after criticizing the utility’s actions before and during the frigid weather.
Xcel Energy customers will eventually see a temporary rider on their monthly electric and natural gas bills to pay for the costs.
The costs stem from a February 2021 storm that brought record cold temperatures and soaring natural gas prices from Texas through the Rocky Mountains to the Midwest. Colorado didn’t experience the widespread power outages other regions did, but Xcel Energy and other utilities saw natural gas prices skyrocket in the scramble to keep the heat and lights on.
The Colorado Public Utilities Commission opened an investigation into utilities’ response to the storm. A May 11 decision by a state administrative law judge noted problems with Xcel Energy’s handling of the storm but recommended approving a settlement allowing the company to charge customers $508 million to recoup expenses.
“It goes without saying that nobody’s happy to be here today and talking about a $550 million expenditure on gas for only a handful of days,” said Megan Gilman, one of the three commissioners.
Xcel Energy agreed to not pass on some costs, including interest on loans it took out to cover the storm expenses.
During the Feb. 13-17, 2021 storm, natural gas prices were $150 to $190 per million British Thermal Units, many times more than the $2 to $3 per million BTUs just before the onslaught of freezing temperatures and ice.
Regulated utilities like Xcel Energy have the right to recover the costs of providing service. The PUC considers a so-called “prudency standard,” which examines whether a company’s actions were reasonable given the things it knew or should have known at the time.
For the most part, the administrative law judge decided Xcel Energy’s actions were prudent. But the decision criticized the company for not communicating with customers about conditions so they could have reduced their use to blunt the expense.
The decision also said Xcel Energy’s handling of customers who agreed beforehand to cut back use of electricity and gas in extreme circumstances was ineffective. Some of the customers who get lower rates for agreeing to service interruptions to help the company conserve power weren’t in positions to do it.
The commissioners expressed concerns about the same issues and what they said was the failure to effectively use plants that can run on both oil and natural gas. The Colorado Office of the Utility Consumer Advocate argued the utility didn’t adequately plan for using oil to avoid buying as much natural gas.
“The interruptible service was obviously very poorly planned,” said commissioner John Gavan. “We have these services for a purpose, and if we’re not ready to execute them and have them work to plan, you’re wasting your time.”
PUC Chairman Eric Blank recommended a kind of penalty ranging from $4 million to $8 million in response to Xcel Energy’s actions. The three agreed to knock $8 million off what the company can recover.
Gilman said she couldn’t see further cutting the amount because it would have been difficult for the utility to foresee how high natural gas prices would rise.
“Winter Storm Uri was an historic storm that presented challenges unlike anything we’ve faced in the past,” Xcel Energy spokeswoman Michelle Aguayo said in an email.
The company learned valuable lessons and has implemented policies to work more closely with customers to lessen the impact of extreme weather in the future, Aguayo said.
The consumer advocate’s office had suggested cutting Xcel Energy’s recovery costs by $50 million to $150 million, saying it didn’t take certain steps to lessen the storm’s toll on ratepayers.
“We were hoping the commissioners would find the serious problems that we did, and they did,” said Cindy Schonhaut, director of the advocate’s office.
Schonhaut sees the PUC’s decision as a partial victory for her agency. “We feel very pleased that the commissioners took quite a bit of time, considering each and every issue.”
It’s unclear when Xcel Energy customers will see the riders on their bills. The PUC still has to issue a written decision and the utility could appeal.
At $508 million, Xcel Energy said residential electric customers would see a monthly increase of $1.43 for 24 months and residential natural gas customers would see an increase of $5.67 per month for 30 months.
The PUC also approved the first phase of a new electric resource plan by Xcel Energy that will end the utility’s use of coal in Colorado by the start of 2031. The plan, which maps out how Xcel will generate its electricity over several years, will close the beleaguered Unit 3 at the Comanche coal plant in Pueblo and includes a plan to help the Pueblo community make up lost revenue due to the plant’s early retirement.