Proposed statewide initiative targets Xcel Energys profits in Colorado

The head of a conservative think tank says Colorado’s system of regulating utilities is broken and he wants to fix it by making the companies share some of their profits with customers.

Jon Caldara, president of the Independence Institute, is proposing an initiative that would require investor-owned utilities to use their annual profits to return to ratepayers at least 5% of the company’s sales in the state.

The proposal applies to all utilities that are regulated in exchange for getting to recover their costs and receive the OK for a certain return on their investments. But the target is Xcel Energy, Colorado’s largest electric utility.

The secretary of state’s office is reviewing the proposal’s language and will decide whether to give the green light to proponents to collect signatures to place it on the ballot. Caldara said the public is frustrated with paying higher rates while Xcel Energy’s profits keep rising.

“If we can get it on the ballot, and that’s a big ‘if,’ I think it will easily pass,” Caldara said.

It will take 124,632 valid signatures from registered voters to put the proposal to a statewide vote in November. The Colorado Public Utilities Commission would determine what the companies would pay.

Xcel Energy spokeswoman Michelle Aguayo said the company is assessing the proposed initiative. “There are still a lot of steps that have to take place before we weigh in on the measure,” she said in an email.

Black Hills Energy, another investor-owned utility doing business in Colorado, is “taking a closer look” at the proposal, but declined further comment.

Xcel Energy could end up returning hundreds of millions of dollars of its profits if the initiative passed. Federal records show that Xcel Energy, based in Minneapolis, made $660 million in profits in Colorado in 2021, up from $588 million in 2020 and $578 million in 2019.

The utility’s net income from its Minnesota operations was $606 million in 2021.

Aguayo said Colorado’s customer base is larger than in other states the company serves and is growing. She said it’s important for the company to continue to invest in the region to keep up with the rapid growth.

Xcel Energy has 1.5 million electric customers and 1.4 million natural gas customers in Colorado, with overlap between the two groups. A $182 million electric rate increase that took effect April 1 will help pay for previously approved projects as well as efforts to prevent wildfires caused by downed power lines, the company has said.

Several speakers in a January Colorado Public Utilities Commission meeting urged the regulators to reject the increase in light of the company’s profits. Responding to a recently proposed $188.6 million natural gas rate increase, the state Office of the Utility Consumer Advocate called the change unjustified and accused Xcel Energy of making “pancaking” rate increase requests.

“Colorado had a grand bargain that the state would give energy companies a monopoly and risk-free profit,” Caldara said. “In exchange, the PUC would oversee them and make sure they’re giving us the least expense power there is.”

But the bargain has been broken and ratepayers are held captive in “a rigged system,” Caldara said.

University of Denver law professor KK DuVivier said she understands people questioning why Xcel Energy makes so much money in Colorado. “That’s a good question. Should we do anything about it?”

But DuVivier, a faculty member of DU’s environmental and natural resources law program, said the proposed initiative isn’t “very useful” and would face a fierce fight from Xcel Energy.

“A better fix would be to say, ‘OK, let’s give the PUC more discretion’” in the process for setting rates, DuVivier said.

Now, the PUC approves rates based on a utility’s projected costs. DuVivier said the system also incentivizes utilities to build more things. The investment is added to the base rate, giving companies a higher rate of return on their equity.

“Xcel’s sales in Colorado have been essentially flat since 2005 and the price of renewable (energy) generation has dropped dramatically, but Xcel keeps driving up our rates and their after-tax profits from Colorado have more than tripled since 2005,” Leslie Glustrom, with Clean Energy Action and a longtime participant in PUC issues, said in an email.

Clean Energy Action is looking at ways to help Xcel Energy’s Colorado customers get “a better product at a lower price — including the Jon Caldara amendment,” Glustrom said.

However, Glustrom, unlike Caldara, doesn’t blame Xcel Energy’s increasing rates on state policy decisions to boost the use of renewable energy and cut climate-changing emissions from fossil fuels. Caldara contends electricity from renewable resources costs more than natural gas and other conventional fuels.

But when Xcel Energy sought bids in 2018 for new electric generation, the quotes from wind and solar developers were the lowest prices for electricity in the U.S. and were well below the cost of coal-generated power. The U.S. Energy Information Administration expects the share of electricity from renewable energy sources will rise to 22% this year from 20% in 2021.

Xcel Energy was the first electric utility in the country to set a goal of being carbon-free by 2050.

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