The spiking energy bills affecting many Coloradans are caused by colder weather and higher gas prices — factors over which neither regulators nor utilities have control, the Colorado Public Utility Commission reported Wednesday.
Xcel Energy utility bills were on average 52%, or $87, higher in December than they were a year earlier, although some consumers saw their bills double, PUC Chief Economist Erin O’Neill told commissioners in a briefing.
Commissioner John Gavan said he was struck by the magnitude of the costs and the financial pressure they are exerting on Coloradans.
“I can’t remember seeing this level of pain in the consumer community since the 1970s and the gas crisis, which I’m old enough to remember,” he said. “So I take this very seriously.”
The rising utility bills follow the approval by the commission of six electricity and gas rate hikes, several allowing for increases due to rising natural gas prices, that have spurred a near-record number of low-income consumers to seek financial aid to pay their bills.
The state-run Low-income Energy Assistance Plan has received nearly 90,000 requests for bill relief, as of Tuesday, compared with 80,000 for the same period last winter, and has issued $25 million in payments. Energy Outreach Colorado, a nonprofit that helps people with their bills, received 44,000 calls to its HEAT helpline in January.
“This is an unprecedented number,” said Denise Stepto, a spokeswoman for the nonprofit. “Is it sustainable from month to month? There is a lot of pressure to do something.”
The average temperature in December was about 10 degrees colder than it was in December 2021, O’Neill said, and that means more energy was being consumed to keep homes warm. Additionally, commodity prices for natural gas have increased substantially — 40% higher than last year — which is a cost that utility companies pass directly to consumers. Smart meters, recent investments in solar and wind energy, and time-of-use rates for electricity customers are not significantly impacting bill hikes, O’Neill said.
“We share the commission’s concerns and appreciate their efforts to provide greater insight into the causes of higher costs,” Xcel Energy said in a statement. The company said it is adding more low-cost renewable energy and securing competitively priced fuel contracts.
Natural gas continues to be the most reliable and affordable source to heat its customers’ homes each winter, Xcel also said. The company is the largest utility provider in Colorado with 1.5 million electric customers and 1.6 million gas customers.
The price of natural gas for delivery in February has dropped 26% between December and January, to 56 cents a therm, so February bills may be lower, Commissioner Megan Gilman said. But even if the bill crisis is resolved in the short term, there’s a systemic problem. The market for natural gas is unregulated, Gilman said, and fuel price spikes and severe weather events will continue to make prices and rates volatile.
“What we thought were the extremes before February 2021 are not the extremes anymore,” she said.
Addressing the overarching problem is not simple. Price hikes could be spread over time — Xcel Energy is doing this over 30 months with $500 million in gas charges from 2021’s Winter Storm Uri. But that could lead to future price spikes “pancaking” on top of each other, Gilman said. The commission needs to think in the long term, she said.
While the base rates only accounted for 16% of the December increase, both Gilman and Commission Chairman Eric Blank said that the commission should focus on those rates — which they must approve. Blank said the doubling of gas base rates since 2011 didn’t significantly impact consumers when gas prices were low.
“Now the combination of higher commodity prices and the doubling of base rates really puts us in a different world and creates much more affordability pressure,” Blank said.
More attention should be paid to what investments utilities make before the companies come to the commission to add them to the rates customers pay.
Another concern that commissioners expressed is Xcel Energy’s lack of incentive. Blank said there ought to be an alignment of interests between the company and its customers.
“When customers lose, utilities should share some of the pain,” he said.
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Gilman said that the mechanism that just passes the cost of natural gas, high or low, on to consumers is also a problem.
“Since it’s a direct pass-through, they do not have an incentive to get you more expensive gas,” Gilman said. “They also don’t have an obvious economic incentive to get the cheapest gas they can. So we need to ensure that they have some skin in the game.”
While 60% of the bill increase was driven by factors the commission can’t control — gas rates and weather — PUC can still have an impact, according to Cindy Schonhaut, director of the Colorado Office of the Utility Consumer Advocate.
“What they can focus on,” she said, “is the 40% of bills beyond the fuel charges,” such as base rates, fixed-use charges and add-ons for specific projects, like pipeline safety.