Xcel Energy ignored numerous weather warnings when buying natural gas and failed to switch to cheaper fuel oil during the historic deep freeze in mid-February, leaving the utility helpless as spot prices spiked to 50 times base costs, according to new expert objections to proposed consumer surcharges.
The state consumer advocate and the Public Utilities Commission staff, though filing separate testimony, agree that the commissioners should reject about $130 million of the $550 million storm cost that Xcel wants to recover from Colorado electric and gas customers over two years of monthly surcharges.
Xcel certainly paid out the extra money for natural gas, the objections say, but the utility could have made things much cheaper for its customers if it had issued warnings, bought even an average amount of gas in advance for February, or used stockpiled cheap fuel oil in electric generating units that can switch between fuels.
Xcel had an ethical duty as a utility to warn consumers the storm would boost their bills, and encourage them to reduce energy use where they could during the storm that blanketed much of the southern U.S., the advocates say.
In June, Xcel said the storm surcharge request would have average gas customers paying $6.20 extra a month for 24 months, and average electric customers paying $2.86 a month. The average consumer who has both services would pay a total of $217.44 for storm costs.
Denver set a new record low for one day of the storm, which hit Colorado between Feb. 13 and 17, the filings note.
“The company had both the information and capacity to take steps to mitigate or minimize the harm to these customers but did not act,” said Cory Skluzak in written testimony, as a rate analyst for the Office of the Utility Consumer Advocate, recently renamed from the Office of Consumer Counsel.
Xcel’s pursuit of the storm surcharges comes on top of a recent request to charge Colorado customers more for adding green energy sources to the grid, and other rate increases, while it reports healthy profits. Investor-owned Xcel is the largest electricity provider in Colorado.
“It’s about what duties a monopoly has to its customers,” said Joseph Pereira, deputy director of the consumer advocacy office. “What we’ve seen is that Xcel put its shareholders’ priorities above all else.”
Since the February storm, Xcel has said it took multiple steps to hedge gas costs and store cheaper gas, but that the natural gas market was out of control due to system outages and delivery problems. The state’s largest utility has said its primary duty is delivering energy to keep customers safe, even if costs spike. In the past, Xcel has said, it only issued usage warnings when shortages are looming and some customers might not get served.
Xcel also has said it does not make a profit on fuel costs but simply passes them on to consumers, and that it will not charge interest on the stretched-out surcharge payments. On Monday, Xcel said it was still reviewing the new testimony and recommendations filed by the PUC staff and the consumer advocate.
The PUC staff filings in the rate increase case show severe weather warnings from multiple sources beginning weeks before the mid-February freeze, and that Xcel was well aware of the forecast.
Still, the PUC staff says, “when faced with forecasts of colder than normal temperatures and ‘extreme cold in February’ the company did not even acquire the baseload supply it had identified as reasonable for normal operations.”
The result was a flood of cash leaving Xcel over the long Presidents Day weekend.
The PUC staff filings show what Xcel paid for gas it was burning for electricity and distributing directly to customers on Feb. 13. Xcel’s baseload gas used that day cost $4.65 a dekatherm, a common unit measurement. The company paid $185.75 a dekatherm for natural gas it had to buy on the spot market the same day as supply disruptions multiplied in the Southwest.
Xcel had promised to improve its forecasting and emergency planning after a big, expensive storm in 2006, the consumer advocacy office said in its testimony. Instead, Skluzak wrote, “because the company did not take meaningful and pertinent steps in the aftermath of 2006, customers are now in a place where they are, once again, ‘holding the bag’ for company missteps and failures to act.”
The PUC staff filing said it’s a mystery why Xcel didn’t save itself and customers money by flipping the switch to cheap fuel oil stores, which were built up specifically for an event like the February storm. The company has said in previous filings it wanted to save the fuel oil in case the storm stretched on longer than forecast.
But even one day of fuel oil use in the natural gas plants would have saved Coloradans tens of millions of dollars, the PUC staff wrote. That amount is part of what the staff is asking the PUC commissioners to reject from Xcel’s overall surcharge request.
Xcel will have the next few weeks to respond to the PUC staff and consumer advocate in its own written testimony, with the PUC deliberating on the case later in the fall. Still to come are more filings and consumer advocate responses to similar February surcharge requests from smaller Colorado utilities, including Black Hills Energy and Atmos Energy.