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An Xcel Energy natural gas pipeline running through Rio Blanco County. Winter Storm Uri caused the utility to purchase natural gas on the open market during a three-day period in February 2021 at a 300% premium. That cost will be passed on to consumers. (The Rio Blanco Herald Times)

The Colorado Utilities Public Commission on Wednesday gave Xcel Energy the go-ahead to collect a half billion dollars from its customers to cover the spiraling costs of natural gas during a winter cold snap in 2021 — but the commissioners weren’t happy about it.

The commission lopped an $8 million penalty off the $509 million settlement figure recommended last month by an administrative law judge and sharply criticized Xcel Energy’s handling of the natural gas price spike and failure to warn customers to curb their energy use.

Still, based on economics and regulations commissioners said they couldn’t do more.

The cost recovery — over the next 30 months — will be divided between electricity bills and gas bills, with the average residential electricity monthly bill rising 2%, or about $1.43, and residential gas bills increasing $5.67 a month, an 11% increase.

This follows a 6.4% increase in electricity bills in April, equal to $5.24 a month on the average bill. Xcel Energy is also seeking an $188 million increase in gas rates, which would, over three years, add $8.14 to the average monthly residential gas bill.

Commission Chairman Eric Blank said the system that enables a utility the right to pass along fuel costs unless it can be proved the company acted negligently is “pretty broken.”

“When customers win the utility should win, when customers lose the utility should lose,” Blank said.

As part of the settlement Xcel said it was forgoing recovering some costs, debts and trading revenues totaling $104 million. Blank, however, called that estimate inflated.

“Going forward,” Commissioner John Gavan said, “we have to operate on a different model.”

The state Utility Consumer Advocate, which represents residential and small commercial customers, challenged the settlement, raising questions about Xcel Energy’s management during the winter storm that gripped the Southwest.

The freeze — dubbed Winter Storm Uri — lasted from Feb. 13 to 17 and led to electricity blackouts in Texas as natural gas prices shot up more than 300% to $190 per 1 million British thermal units.

During the Presidents Day weekend, which fell in the middle of the price surge, when prices were as high as $188 for 1 million BTUs, Xcel Energy went into the wholesale market to purchase extra natural gas for the holiday weekend. It is these purchases the company is passing on to its customers.

The UCA said that the company failed to effectively use its dual-fired generating units, which could have saved millions of dollars by switching to fuel oil from high-priced gas.

“It sounds like the company did not adequately plan on how to use its dual-fuel plants,” Blank said. “This is substandard practice.”

Xcel Energy’s program that pays business customers that agree to have their electric or gas service curtailed during peak periods or extreme events was, according to the UCA, “haphazard and nearly resulted in disaster.”

“This is another example of operational shortfalls at the company,” Gavan said. “This company needs to focus on operational excellence across the board.”

It turned out that some customers in the program for safety reasons could not have their service turned off. Xcel Energy conceded it did “face issues” getting customers on interruptible schedules to curtail their energy use.

“The interruptible service was poorly planned,” Blank said. “I am very troubled by this.”

 Administrative Law Judge Melody Mirbaba, who oversaw the case, had ruled that the company “had failed to act prudently” by not issuing conservation messages.

The company was also criticized for failing to warn customers to cut back on their energy use during the holiday weekend to conserve energy during the peak period.

“It is troubling how unseriously the company has taken conservation messaging,” Commissioner Megan Gilman said.

Despite Xcel Energy’s missteps, Gilman said that at their core, the expenses are driven by the natural gas markets. “It is very hard if not impossible for the company to predict natural gas prices.”

Nevertheless, Gilman said better planning is needed in an effort to try to moderate the market impacts, particularly since the potential risk is now evident and that the chance of such a spike is no longer unforeseen.

“That only works this time,” Gilman said. “So the company is on notice. We are all on notice.”

Special to The Colorado Sun Twitter: @bymarkjaffe