Four Colorado electric cooperatives that buy wholesale power from Xcel Energy have filed a complaint with federal regulators contending the state’s largest electricity provider mismanaged its natural gas supplies during a severe 2021 winter storm.
The co-ops maintain that Xcel Energy was “imprudent” by failing to follow its own supply plans leading to the utility having to buy high-priced gas on the spot market during Winter Storm Uri in February 2021.
The four — Core Electric Cooperative, Holy Cross Energy, Yampa Electric and Grand Valley Power — are asking the Federal Energy Regulatory Commission to order the return of $6.9 million in fuel charges.
“We have serious concerns that a substantial portion of Xcel’s fuel costs were entirely avoidable,” Grand Valley Power CEO Tom Walch said in a statement.
“We feel we have a duty to our members, the ones who ultimately pay Xcel’s charges, to challenge these costs. It is especially critical for us to protect our members from preventable runaway costs coming from future weather events.” Walch said.
The four cooperatives collectively provide electricity to 570,000 people in predominantly rural parts of the state, such as Mesa, Garfield and Moffat counties. Core serves nearly 170,000 customers in rural and suburban Front Range communities.
The charges are from the 2021 winter freeze that boosted electricity demand across the middle of the county, while disabling Texas natural gas production. This led to the spot market price of 1,000 cubic feet of gas jumping to $200 from $3, the complaint said.
“Our gas purchasing practices before and during the storm were prudent, consistent with the law and our contractual obligations and ensured continued energy service for all customers – wholesale and retail – during the unprecedented storm,” Xcel Energy said Wednesday in a statement.
Under pass-through provisions, Xcel customers pay for the cost of the gas whatever the price.
Xcel Energy residential customers will be paying $500 million in Storm Uri natural gas charges over three years under a plan approved in June by the Colorado Public Utilities Commission.
The PUC did trim $8 million from the recovery citing the poor performance of Xcel Energy’s subsidiary, Public Service Company of Colorado, in alerting customers of the higher prices and in its execution of its energy efficiency programs.
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The state Office of the Utility Consumer Advocate, which represents residential and small commercial customers, also challenged the $500-million award, raising questions about Xcel Energy’s management during the storm.
The four co-ops were charged $17.5 million for extra fuel costs.
“We understand and empathize with the financial challenges the changing commodity market prices bring,” Xcel Energy said.
In their complaint the co-ops contend that Xcel Energy made the situation worse by not following its monthly supply plan and by shifting natural gas supplies to reserves rather than using them to make electricity, necessitating the purchase of more spot market gas.
“PSCo’s failure to adhere to its Monthly Supply Plan caused the company to purchase significantly more spot gas than called,” the co-op’s complaint said. “Actions a reasonable utility management would not take, constituting evidence of more than a “bare allegation of imprudence.”
Based on documents obtained from Xcel Energy, the complaint said that in 2021 between Feb. 13 and Feb. 17 the utility diverted 120 million cubic feet of gas per day from generation supplies to meet its reserve requirement.
“It is like someone knocking at your front door to pay a credit card bill and you are putting the money in a savings account,” Holy Cross CEO Bryan Hannegan said in an interview.
The wholesale contracts require the co-ops to pay reasonable and prudent costs, Hannegan said, but getting Xcel Energy to show that wasn’t easy.
“Through the course of almost two years of investigation, what the wholesale customers were able to find was that Xcel wasn’t following their own planning process,” said Amber King, a spokeswoman for Core, previously known as Intermountain Rural Electric Association. “They didn’t have enough fuel to begin with and then on top of that there was the winter storm.”
The investigation was impeded by Xcel Energy, which stonewalled many of the co-ops’ requests for data, the complaint said.
“We still have not received all the documentation and that is one of the reasons we filed the complaint,” King said “We are still not sure what the full weight of damages would be.”
Xcel Energy said it was “disappointed” it could not come to a resolution with its wholesale customers and remains hopeful “we can find a resolution.” The company said it will file with FERC a “full description of the prudent measures” it took during Storm Uri.