State lawmakers Tuesday unveiled an effort to rein in Coloradans’ rising utility bills following months of investigating how investor-owned electricity and natural gas providers, like Xcel Energy and Black Hills Energy, operate and how their finances work.
The measure, Senate Bill 291, has three principal goals: limiting the impact of rising natural gas prices on consumers, increasing transparency in electric and gas rate cases, and trying to reduce expensive natural gas investments long term. Many of the changes would be made through Colorado’s Public Utilities Commission, which regulates the state’s investor-owned utilities, and take a year or more to affect Coloradans’ energy costs.
The legislation is the result of work by a joint select committee in the legislature whose formation this year was spurred by soaring natural gas prices during the 2022-23 winter heating season. Some customers’ bills tripled in December and January.
“At the end of the day, what we’re trying to do is insulate consumers from volatile spikes in the commodity market for fuel and to contain long-term, as well as some short-term costs,” said Senate President Steve Fenberg, a Boulder Democrat and prime sponsor of the bill.
But Robert Kenney, CEO of Xcel Energy’s Colorado subsidiary, which is the largest natural gas provider in the state with 1.5 million customers, called the bill “fatally flawed.”
“This bill doesn’t get at the things the joint select committee was created to address,” Kenney told The Colorado Sun. Xcel Energy, he said, is willing to work on amendments, but the bill “just isn’t there yet.”
Smoothing out rate spikes
Coloradans’ utility bills spiked in recent months for a myriad of reasons, including an especially cold winter and the war in Ukraine, which pinched Russian natural gas supplies to Europe and drove up prices worldwide. The impact was felt at the household level because the price of fuel to heat homes or run electric turbines is passed directly onto consumers.
Senate Bill 291 aims to prevent those spikes by requiring each utility — by November, when the winter heating season begins — to file a gas risk management plan, including a monthly cap on fuel charges.
The cap would stabilize bills and the utility could capture the costs above the cap, with PUC approval, over time.
Fenberg said the idea is to turn a $25 or $50 cost increase in a single month into a 5-cent or 10-cent monthly increase that gets paid off over several years.
“It basically just levels it out so you, as a consumer, aren’t at the whim of the market,” Fenberg said.
Xcel Energy’s Kenney said that the legislation should have focused on strategies such as increasing natural gas storage or promoting more hedging and long-term gas contracts — all ways to blunt price swings.
Making sure utilities have “skin in the game” when it comes to rising fuel costs
By 2025, the PUC would establish a mechanism that would split the risk of volatile natural gas costs between the utility and its customers. There would also be incentives if a utility could avoid increases from swings in market gas prices.
The PUC would have discretion to decide a percentage of the increase that utilities would have to cover through a hit to their bottom line.
“It creates a process where the utilities will have skin in the game when it comes to fuel costs,” Fenberg said. “Right now, they repeatedly will tell you that if they don’t pass off those costs to consumers, they don’t make a profit.”
The problem, Fenberg said, is that if utilities pass along the fuel costs to customers, whatever the price, “they have no incentive to actually contain those costs.”
A prohibition on utilities passing along the cost of lobbying, advertising and employee pay raises
Xcel Energy is consistently the top spender on lobbying state departments and the legislature. Senate Bill 291 aims to ensure ratepayers aren’t covering the cost of that work, as well as other activities that aren’t directly related to providing electricity or natural gas.
Fenberg said while the bill sponsors don’t know for sure that utilities are passing those costs onto customers, they don’t for sure that they aren’t.
“We don’t know because there’s not a required disclosure and transparency,” he said.
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In its electricity rate case now pending before the PUC, Xcel Energy said that it was not including in the rate request $1.1 million in civic and political expenses, $2.6 million in advertising and $276,000 in board of directors compensation.
The measure prohibits utilities from passing along the following costs to its customers:
- More than 50% of annual total compensation for board members
- Tax penalties or fines
- Expenses related to investor relations
- Advertising and public relations expenses, such as those aimed at improving public opinion, “that do not directly relate to a purpose or program that is required until statute” or PUC rule
- Lobbying expenses
- Charitable giving
- Organizational or membership dues
- Contributions to political candidates or political spending committees
“The bill would put Colorado at the front of the pack among states pursuing utility accountability reforms,” David Pomerantz, executive director of Energy and Policy Institute, said in an email. The Institute identified Xcel Energy as a backer of Coloradans for Energy Access, a trade group, promoting natural gas.
If the PUC determines that a utility improperly billed its ratepayers for one of the above costs, the utility would be ordered to repay the money to its customers.
“They shouldn’t be allowed to advertise and sponsor and do all of those things with ratepayer dollars,” said Sen. Lisa Cutter, a Jefferson County Democrat and another lead sponsor of the bill.
Additionally, the legislation directs the PUC to adopt measures to limit the amount of rate-case expenses, such as fees for consultants and attorneys, that can be charged to customers. (Rate cases are when utilities go before the PUC for permission to charge customers more for electricity or natural gas costs.)
The $64 million gas rate increase approved in the fall of 2022, for instance, included about $2 million in legal fees.
The bill offers suggestions, but the PUC would have broad discretion over how to limit rate-case expenses from being passed on.
Investigating how new development increases prices
The long-term part of the bill looks to cast more scrutiny on future natural gas investments in Colorado and to help speed the transition to electrification.
The bill calls for the elimination of so-called line allowances, a grant the company makes to help pay for the hookup of a new home to the natural gas system. For Xcel Energy the allowance is about $1,000 a home.
The legislation would also direct the Colorado Energy Office to oversee a study of the value and depreciation of natural gas investments in the face of projected declines in natural gas customers and sales, as well as the state’s goals to reduce greenhouse gasses.
“As Xcel is thinking about larger natural gas investments we have to be on the same page on how long those investments are going to be viable,” said Danny Katz, executive director of CoPIRG, a public interest advocacy group. “The depreciation study will help us all realize what are the real risks with gas.”
In an April investors presentation, Xcel Energy projected spending nearly $2.6 billion on natural gas infrastructure in Colorado between 2023 and 2027.
The bill would also prevent a utility from charging a fee to a customer who seeks to voluntarily terminate gas service.
What observers are saying
Here are some reactions from people and groups that follow energy policy:
- “There is no one solution,” Katz said. “I think this bill is a really good step. It rightfully focuses on the role of gas in fueling our high utility bills.”
- “We’ve had a lot of trouble getting the right information at the right time in the last gas rate case,” said Meera Fickling, a senior climate policy analyst and Western Resource Advocates. “We need to be able to get the information on time.”
Since the bill was introduced Tuesday night, many groups haven’t reviewed the measure or taken a position on it.
On the state’s lobbying disclosure website, the Adams County Regional Economic Partnership has registered its opposition to the measure, while the National Association of Industrial Office Properties and International Council of Shopping Centers has reported being neutral on the bill.
What else you should know
The four lead sponsors of the bill — Fenberg; Cutter; Rep. Chris deGruy Kennedy of Lakewood and Matthew Martinez of Monte Vista — are all Democrats.
Democrats hold large majorities in the House and Senate, so the bill doesn’t need Republican support to pass. But the fact that there are no GOP sponsors on the measure indicates the legislation may not sail through the legislature.
Sen. Barbara Kirkmeyer, a Brighton Republican who also sat on the select committee, said she wasn’t consulted about the bill. She hadn’t read the measure on Wednesday and thus declined to comment on what’s in it.
“I didn’t get any input at all,” she said.
The legislation hasn’t been scheduled for its first hearing yet. The legislative session ends May 8.