As state regulators consider Xcel Energy-Colorado’s request for a $188.6 million natural-gas rate increase, advocates are warning that new investments by the utility in gas facilities will leave customers stuck paying big bills for energy they won’t need.
Natural gas will be the new coal, critics contend. They say the move to renewable energy and running buildings with all electricity means expanding natural gas pipelines and plants now will leave Xcel’s customers paying for facilities they won’t need just a few years down the road.
That scenario already is playing out with coal. Xcel plans to close its coal-fired power plants earlier than scheduled and will seek to recover its costs for the facilities from ratepayers.
“We’ve got a billion dollars worth of coal plants that are stranded and now Xcel is trying to do the same thing on their gas system,” Leslie Glustrom, a Boulder resident with the nonprofit Clean Energy Action, said during a recent hearing of the Colorado Public Utilities Commission.
The coal plants are considered “stranded assets” because they will be closed earlier than planned when they were designed, financed and built. In common practice for regulated utilities, Xcel is seeking approval to tap ratepayers to help cover its costs for those assets.
Just what customers will have to pay is part of the case now before the PUC. Final statements in the gas-rate case are due by mid-September. The commission is expected to decide by November, when Xcel’s proposed rate increases would take effect.
Denver’s programs and policies to cut greenhouse-gas emissions and power all buildings by electricity will significantly reduce demand for natural gas, said Jonathan Rogers, with the city’s Office of Climate Action, Sustainability and Resiliency.
“We encourage the commission to ensure any additional investment in the energy infrastructure accounts for the decrease in demand for natural gas service due to the city’s efforts and trajectory,” Rogers said.
State lawmakers and local governments are trying to speed up the transition from coal and other fossil fuels to renewable energy sources to deal with climate change and reduce pollution. Utilities, including Xcel, have set goals for cutting emissions and face targets set by state law.
Colorado’s goals for slashing overall statewide emissions, compared to 2005 levels, are at least 26% by 2025, 50% by 2025 and 90% by 2050. Xcel’s goal is to provide carbon-free electricity and produce net-zero greenhouse gas emissions from its natural gas business by 2050.
Xcel Energy, which is based in Minneapolis and operates in eight states, sees natural gas as an important step on the path to a clean-energy future. Customers depend on the company’s natural gas service, Alice Jackson, former Xcel Energy-Colorado president, said in a letter to the PUC.
“We have a duty to serve our customers reliably, and natural gas currently remains the most efficient fuel for heating homes and businesses, especially in colder climates,” Jackson said.
Xcel has 1.5 million electric customers and 1.4 million natural gas customers in Colorado, with substantial overlap between the two.
Angel, devil on the shoulder
KK DuVivier, a professor at the University of Denver’s Sturm College of Law and an expert on national resources and energy law, said she thinks Xcel “has this huge conflict of interest.”
“It’s as though it’s one of those old movies where an angel is sitting on one shoulder and on the other side there’s this devil,” DuVivier said. “They’re claiming to be a national leader, pledging to be net-zero by 2050 in the electric sector. But on the other hand, brochures I get in my bills boast it’s one of the largest natural gas distribution suppliers in the country.”
Xcel has said the rate increase will help meet growing energy needs across the state, improve gas pipelines and further reduce greenhouse-gas emissions from its operations.
However, DuVivier said Xcel could pursue alternatives to natural gas instead of extending gas lines. Cities in some parts of the country have banned natural gas hookups for new buildings to curb greenhouse-gas emissions. Big Pivots, a Colorado online publication, recently reported that Crested Butte became the first community in the state to adopt such a ban.
“I feel like Xcel is sort of making the same mistake they did with Comanche 3 in 2010 when they said, ‘We’re going to keep going with coal,’” DuVivier said.
Comanche 3, the newest unit of a coal-fired power Xcel plant in Pueblo, started operating in 2010 and was supposed to run until 2070. The unit, beset with mechanical and operational troubles, is now scheduled to close no later than Jan. 1, 2031.
Ratepayers are expected to help cover the costs associated with paying off and closing Comanche 3 and two other coal plants. Part of another plant will be converted to natural gas and Xcel will seek recovery of costs for retiring the coal-related portions.
“Pancaking” rate increases
In addition to the longer-term impacts of Xcel’s plans, there are the immediate effects — namely higher bills for consumers.
Under Xcel’s proposal, the average Colorado residential customer’s monthly bill of $62.42 would rise by $4.16 starting in November, then another $1.83 in November 2023 and an additional $2.15 in November 2024.
The average small business customer’s bill of $251.19 would go up $19.09 in November, followed by an additional $7.30 in 2023 and another $8.37 in 2024.
“This is Xcel’s fourth rate case in four years,” said Bill Levis, a volunteer advocate for AARP Colorado.
Levis said he remembers dealing with one electric rate case and one natural gas rate case during his five years as head of what is now the Colorado Office of the Utility Consumer Advocate. He was consumer counsel from 2009 to 2013.
Joseph Pereira, deputy director for the advocate’s office, which represents the public before the PUC, has referred to a series of recent rate requests as “pancaking.” His office protested Xcel’s proposed gas increase and one by Dallas-based Atmos Energy, which is seeking approval of $65.2 million for its overall cost of service — a 61% jump.
Atmos Energy, which has roughly 126,000 customers in Colorado, said in an email that the higher rates will help it increase the safety of its distribution system and modernize its infrastructure while reducing methane emissions.
“While we have filed multiple rate requests in the past years, existing rates are based on costs, infrastructure and revenues from three years ago,” Xcel spokeswoman Michelle Aguayo said in an email.
The company was required to submit a natural gas rate case this year as part of a previous settlement, Aguayo said.
Levis and Pereira can’t remember the PUC ever rejecting a rate increase, but they said regulators have asked for changes or cut the size of a proposed hike. Pereira said the commission is asking more questions about the capital investments that utilities propose.
Levis is concerned that as more people opt for solar and other alternatives to get off the system, the customers who remain and who can least afford it will end up paying a bigger share of the costs.
“The pancaking of rates for customers, the majority of which are residential, continues to weigh disproportionately and heavily on those who have less: less income and less opportunities,” said Jean Nofles, the volunteer president of AARP Colorado.
Nofles said a 2021 law directs the utilities commission to consider the impacts of decisions on disproportionately affected communities.
“I hope the commission does not allow the rate increases and I hope that Xcel Energy goes back to the table to come up with a more equitable way of meeting their revenue requirements,” said Nofles, a former analyst for the PUC.
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