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The first of Xcel’s “smart meters” is seen installed on Wednesday, June 30 at a residence in Littleton. The new meters read household energy use in real-time, designed to give customers more accurate reads. Almost all 1.6 million Xcel Colorado customers will have smart meters by the end of 2023. (Olivia Sun, The Colorado Sun)

The average electric bill for Xcel Energy’s residential customers will go up $5.24 a month — a 6.4% increase — starting in April under a $182 million rate hike approved Wednesday by the Colorado Public Utilities Commission.

The PUC voted 3-0 to accept the increase, which was agreed upon in rate-case negotiations that included the Colorado Utility Consumer Advocate and Energy Outreach Colorado, a nonprofit advocacy organization that, among other things, helps low-income households pay utility bills.

“Although a 6.42% rate is troubling to me, I find the settlement is just and reasonable,” Commissioner John Gavin said.

Rates for the average small commercial customer will also rise 6.2% or about $6.62 a month.

There will be more Xcel Energy electricity rate cases to come, said Ron Davis, the commission’s chief adviser. “The company will be back in for rate requests in the next 3 or 4 years at the outside.”

Utilities’ expenses and investments are recovered through rate cases. The PUC reviews those costs to assure they are appropriate and then sets an appropriate return on the investments the company has made. In this case, for example, Xcel Energy asked for a 10% return on investment and the settlement agreement reduced it to 9.3%.

In addition to the electricity rate increase Xcel Energy also is asking for a temporary rate increase to recoup $550 million in extra electric and natural gas costs incurred by as a result of a severe winter storm in February 2021, which led to a spike in natural gas prices. 

The company, the state’s largest utility with more than 3 million electricity and natural gas customers, has also filed an overall natural gas rate case, seeking an $8.14 increase in the average bill over three years.

The three rate cases could raise the average Xcel Energy utility bill by $16.49 by the end of the year.

One element in the settlement agreement that the commission did not accept  Wednesday was the method for recovering costs and the portion of the plant that still had not been amortized or paid off from the retirement of a coal-fired unit at the Craig Power Plant and two coal-fired units at the Hayden Station. Both coal-burning stations are to be shut down by 2028. 

Xcel Energy has put the cost of decommissioning and amortizing the remaining value of the Craig unit at $27.4 million. The costs for the two Hayden units is $77.6 million.

Rather than settling on any cost recovery method right now, Gavin and Commissioner Megan Gilman said they wanted a full review of options, particularly the use of low-cost bonds known as securitization.

“It is important for us to consider all the options,” Gilman said. “We owe it to the ratepayers to understand all the options.”

Special to The Colorado Sun Twitter: @bymarkjaffe