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Colorado governor pressures PUC to protect utility customers from storm price surges

“Colorado Ain’t Texas,” Jared Polis’ office says in letter warning about high prices Xcel and others paid during February storms

Xcel Energy's coal-fired Comanche Generating Station, located in Pueblo, is the largest power plant in the state of Colorado. The facility can generate 1,410 megawatts of power. Comanche Units 1 and 2 are shown here. (Mike Sweeney, Special to The Colorado Sun)
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Gov. Jared Polis on Tuesday urged the state Public Utilities Commission to protect consumers from gas and electric price spikes experienced by utility companies during the Valentine’s Day weekend Southwest cold snap, adding pressure to a PUC investigation of power company requests to raise prices. 

Utilities have told regulators in multiple states that their costs for natural gas — a primary backup during storm-surge demand — hit 50 to 200 times normal prices. In Colorado, utilities have the right to ask consumers to pay back storm-surge costs, while the PUC has the right to review and modify or deny the requests, unlike in Texas, whose largely unregulated market passes thousand-dollar monthly surges straight to customers. 

While registering the governor’s official request in an “investigation docket,” the PUC also agreed to give five electric and gas utilities operating in Colorado more time to explain their actions during the storms that wracked the Southwest beginning Feb. 13.

Xcel Energy and Atmos Energy Corp., which delivers gas to 120,000 Coloradans in multiple  counties, have filed documents with the PUC saying supply spikes cost them hundreds of millions of dollars they must recover from consumers or investors. The other utilities have yet to file storm cost estimates or details on how much their backup efforts cost them or inconvenienced customers.

The governor’s letter to the PUC, echoed in a news release from his office titled “Colorado Ain’t Texas,” said some Colorado-operating utilities may have paid “exorbitantly high market prices” on the spot market during the storm. “Consumers should not be expected to shoulder unexpected costs without first being advised to reduce usage,” the letter said. 

Consumer and environmental advocates said while it’s common for utilities to seek fuel spike paybacks, and for the PUC to push back, a warning shot from the governor was a new development. 

TODAY’S UNDERWRITER

“It’s unusual,” acknowledged Erin Overturf, deputy director of the Clean Energy Program at Western Resource Advocates. 

While February cold snaps are expected in Colorado, the severity of the freeze in Texas and other southern states boosted home heating demand while damaging energy supplies, from freezing up coal piles and gas pipelines to icing over wind turbines and solar panels. The PUC’s investigation launch notes that while natural gas prices have stuck at about $3 per MMBtu purchase unit for years, storm prices surged to $150 to $190 at two distribution hubs for Colorado. Texas and other states saw prices jump beyond $600 per unit. 

Xcel, which operates in Colorado as Public Service Co. of Colorado, said in a federal financial filing the price surge could cost it $650 million more than usual for storm-related supplies across its eight-state operating region. Xcel said in its filing it would seek relief from regulators to get some of the money back through special fuel cost requests, but added it expected heightened scrutiny.

Xcel-Colorado President Alice Jackson said in an interview Wednesday that a significant portion of the natural gas for homes and to run electricity plants was price protected.

“We activated those hedges,” Jackson said. “Over 60% of the gas for customers was hedged. Still, a portion was exposed to spot prices.”

Atmos said in a similar filing the price spike meant it owed $2.5 billion to $3.5 billion for gas by the end of March, while it currently holds only $3 billion in total cash and other liquid assets. 

Atmos, owned by investors and traded on public markets, did say in the filing it was confident that taking on debt, new investors or other financial vehicles  would fill the hole, and that “therefore, the Company continues to believe earnings per diluted share for fiscal 2021 will be in the previously announced range of $4.90 to $5.10.” 

Shares of Atmos jumped to almost $94 after the storm from about $90 at the beginning of February, where it returned this week. 

Atmos Energy delivers natural gas to about 120,000 customers in Colorado. Its service areas are noted in yellow. (Atmos Energy)

Overturf said natural gas is always the most volatile fuel source for utilities, and that the rules are set up to allow utilities to pass through at least some of their extra costs to consumers. If it’s a large price spike, Overturf said, the PUC can spread out that rate recovery over time for less shock to the consumers, but increases are likely to show up on their bills after a few months under the heading “ECA,” for Energy Cost Adjustment. 

Coloradans are better protected than some states by the recovery rules, Overturf said. Grid “nerds” will be very interested in the company filings, she added, that explain what happened to their prices during the storm and whether they were well prepared. 

Some southern consumers are seeing storm-related bills reaching four and five figures. Some Texans are reporting their previously affordable surge-pricing agreements are now costing them thousands or even tens of thousands of dollars just for February heat. 

The PUC, whose demands were reflected in the governor’s letter, asked each utility to explain:

  • Their forecasts for both weather and demands on their system leading up to the Feb. 13-16 cold spell
  • Their natural gas purchases to cover that time
  • How they tried to hedge gas prices specifically for the storm, and whether it worked

The governor added that the PUC should assure utilities have customer-alert systems in place before deciding whether to allow them to add surge costs into future rates. The letter said Platte River Power Authority, serving Fort Collins and northern Colorado, handled a shortage in backup gas generation supplies by asking customers to turn down thermostats on Feb. 14. The power authority has said customers cut their demand enough that no blackouts were necessary. 

Utilities should allow customers to opt into rolling blackouts, the governor said, or “reduce or forego power or heat for a couple hours to avoid hundreds of dollars of extra charges in utility costs.” 

PUC questions about power supply during the storm will likely address critiques from some political leaders about the role of renewable energy on the grid. Platte River Power told reporters it might need backup gas supplies from Xcel to fire up a gas-generated electrical plant, in part because ice froze up wind turbines in Wyoming and snow covered solar panels in Colorado.

Texas leaders also criticized the alleged unreliability of renewables during their hard freeze, though energy experts have said supply and price spike issues in natural gas played a larger role. 

Colorado Sun writer Mark Jaffe contributed to this report. 


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