Xcel Energy and other utilities pulled cheaper gas from storage over Presidents Day weekend, switched to bargain fuel at power plants and hedged prices as much as possible, according to new filings for a PUC investigation, but did not take the “drastic” step of warning consumers to cut back or face enormous bills.
New documents at the Public Utilities Commission have Xcel Energy and other providers explaining when record-cold temperatures spiked gas prices and forced rapid calculations of demand, storage, spot prices, which customers could safely be shut off to ease pressure, and where regional gas hubs were bypassing Colorado to send natural gas to freezing Texans.
Xcel and Atmos Energy Corp. say they partially succeeded, with Xcel alone saying its maneuvers saved customers $825 million. But it wasn’t enough. Xcel as a regulated utility has the right to ask consumers to pay extra fuel costs, and wants to charge the average Colorado consumer $264 over the next two years just for Presidents Day weekend. Atmos and others are signaling their requests to the PUC will be similar.
But the PUC, the independent Office of Consumer Counsel, interest groups and individual citizens are asking why the Colorado utilities didn’t use more of their stored natural gas bought at pre-emergency prices; why they didn’t warn customers more explicitly that they faced big premiums for every notch on the thermostat; and, whether they hedged prices adequately beforehand. The PUC, urged on by Gov. Jared Polis in an unusual letter full of specific requests, has opened an investigation on the mid-February storm and the utilities’ potential charges to consumers.
While the stakes for the consumer are high, multiply those by millions of households in Colorado alone and it becomes clear the outcome is crucial for the companies as well. Xcel notes in its late Friday that it increased a pre-planned debt placement by hundreds of millions to cover the costs while it deals with the PUC. In its own event summary to the PUC, Atmos said it issued $2.2 billion of new debt in early March, in part to cover the higher storm gas prices.
In the same filing, Atmos said it expected its higher costs in Colorado to result in $180 in extra costs to the average consumer in its northern Colorado delivery area. Like Xcel, other utilities have indicated that if they try to recover that money from consumers, it will likely be in monthly increments over two years. The average commercial customer in northern Colorado may be asked to pay $1,120 extra.
Other utilities were ordered by the PUC to offer narratives of their storm responses, including Black Hills, but did not appear to respond on Friday.
The filings claim that from meteorology desks to fuel trading desks, the utilities were doing all they could to keep gas and power running, while avoiding spot prices rocketing to 100 to 300 times normal.
“We do not like the market prices that were the result of this extreme weather event and their subsequent impacts on our customers – especially in these times. The unexpected and record-breaking market prices experienced on Friday, Feb. 12, and applicable to the natural gas secured for the four-day holiday weekend, were exceptionally high . . . “ Xcel said in its new explanation of the events.
Xcel said its in-house forecasters in early February issued an “Extreme Cold Alert” for Valentine’s Day weekend, and then it got worse than that. “On Feb. 14, a new record low temperature of minus 13 degrees and record coldest high temperature of 1 degree was set in Denver. Denver had five consecutive days with a high temperature of less than or equal to 20 degrees, with overnight lows far below 0 degrees,” Xcel said.
The company, which serves about 1.4 million people across Colorado, details a number of steps it took to keep lights on at a reasonable cost:
- Xcel switched some natural gas burning electric plants to fuel oil as a cheaper alternative to spot gas, testing their systems ahead of time to make sure they’d stay online.
- The main natural gas supply for the company, which it both passes through for home heating and uses in boilers to generate electricity, was hedged well ahead of time at a relatively low price. The PUC, however, does not necessarily want utilities to hedge all of their supplies, because they might lock in higher prices and miss bargains that would benefit consumers.
- Xcel says it used all the cheaper natural gas storage it could, purchased ahead, in order to avoid spot prices that shot from $3 a standard unit to up to $900 at times. The company explains that it can’t use too much of the reserve, as it must have guaranteed supplies for essential services the rest of the month if weather or other accidents interrupt new supply.
- In an area of dispute Polis noted and which is sure to be a focus of the ongoing investigation, Xcel said it issued standard messages to consumers about how to save energy, but did not explicitly warn them about higher prices and outages.
“We take these drastic steps only for the purpose of maintaining system reliability when there is a significant risk of forced outages. Indeed, these kinds of appeals are tools we need to preserve for our most dire system emergencies, where system integrity is at risk and we need the help of our customers to avoid the kinds of forced blackouts that were seen in Texas,” Xcel’s filing said.
Xcel also noted that some of its higher costs were locked in by the storm falling over the traditional three-day President’s Day weekend, which this year coincided with Valentine’s Day. When prices were already spiking on Feb. 12, Xcel and other utilities had to buy daily gas in four-day blocks to cover the holiday weekend.
Xcel said in the filing that its hard work meant that two-thirds of gas distributed to customers and 35% of what it needed for electricity generation was sourced through “long-term” stores, meaning previously hedged contracts and storage. That saved Colorado customers $825 million in additional fuel costs over that four days, Xcel claims.
Atmos’ filings also say it did not issue extraordinary service interruptions or price warnings to customers during the storm.
“Interruptible and curtailable customers were not directed to interrupt or curtail load in order to reduce consumption over the weekend of Feb. 13-16,” Atmos said. “The company’s tariff permits it to interrupt transportation customers if there is insufficient capacity to serve them. However, the company had sufficient capacity to serve all customers. Similarly, curtailment under the tariff refers to the inability of a customer to receive gas due to a shortage of gas supply. There was sufficient gas supply for all customers on the Company’s system.”
The supply was there, in other words. It’s just that the price was extraordinarily high, and Coloradans and their regulators will be arguing over that bill for months to come.
The Colorado Sun has no paywall, meaning readers do not have to pay to access stories. We believe vital information needs to be seen by the people impacted, whether it’s a public health crisis, investigative reporting or keeping lawmakers accountable.
This reporting depends on support from readers like you. For just $5/month, you can invest in an informed community.