Xcel Energy, Colorado’s largest electricity provider with 1.6 million customers, is seeking a 9% increase in rates — about $10 on the average monthly residential bill — even as state regulators voice concerns about affordability.
The utility filed the rate request on Nov. 21 with the Colorado Public Utilities Commission, seeking to raise $356 million in additional revenue to recover infrastructure investments, operating costs and lost revenue sources.
It has been three years since Xcel Energy increased its basic charge for electricity.
During that time the company has spent nearly $300 million upgrading the distribution system that serves homes and businesses.
“These investments are aligned with state policy, with our customers, needs and wants and with our own desires to reduce climate change,” said Robert Kenney, the CEO of Xcel Energy’s Colorado subsidiary.
“Every affordability metric that we use will remain below the national and Colorado averages, which has been the case for the last 10 years,” Kenney said.
The company, Kenney said, is also going to expand programs to help low-income and seniors pay their bills.
The proposed rate hike, however, comes at a time that state regulators and consumer advocates are increasingly concerned about the impact of rising electricity rates on household affordability.
“We’re seeing no easing from the pressures in the economy, and yet the company continues to act in a manner that none of these outside forces seem to play into the equation,” said Joseph Pereira, deputy director of the Colorado Office of the Utility Consumer Advocate.
“Bringing these rate cases largely has to do with the returns and dividends it is looking to meet at the corporate level,” Pereira said. The UCA represents residential and small commercial customers in rate cases.
In analysis of Xcel Energy’s plans to invest $22 billion in Colorado over the next five years, PUC Chairperson Eric Blank said rates could rise as much as 72% and that Xcel Energy’s Colorado earnings could rise to $1.6 billion from $700 million in 2020.
The fact that rates remain below the national average — which includes states with very high electricity prices such as Hawaii and California — is of little solace, Blank said.
“Having heard from hundreds or thousands of customers over the course of many rate cases,” Blank said, “my sense is that customers care mainly about what their bills are now and what they’re going to be. So for me, in thinking about and defining affordability, I suppose that we look mainly at growth in average residential rates and bills from today’s level.”
“We may need to explore ways to manage capital spending and rate impact, including in the upcoming rate cases ,” Blank said in remarks at the commissioner’s weekly meeting, two days before Xcel Energy filed for the rate increase.
Mounting electricity prices have been an issue across the country with electricity rates rising twice as fast as inflation since 2022 leaving 1 in 6 families behind on their utility bills, according to the National Energy Assistance Directors Association.
Soaring electricity rates were a major issue in the New Jersey and Virginia governors races this month.
“We recognize it’s a highly political issue,” Xcel Energy’s Kenney said.
Xcel is not alone in its rate increase requests
In its rate filing Xcel Energy noted that its request is just one of 57 rate increases being sought by utilities this year nationwide, and in Colorado, United Power, Colorado Springs Utilities and the CORE Electric Cooperative have announced rate increases.
“These filings reflect the same underlying realities that we face — aging systems, rising costs for labor and materials, and evolving reliability and sustainability expectations,” Steven Berman, the utility’s regional vice president of regulatory and pricing, said in PUC testimony.
There are multiple reasons for the surge in rates: the need to update the power grid, the transition from old coal-fired power plants to renewable generation, the growth of natural gas generation and the volatile price of its fuel, and wildfire related costs.
Another spur to rates is the growing demand for electricity from data centers, according to a Bank of America study.
“The pressure on peak electricity demand capacity will likely persist, potentially meaning unyielding pressure on customer utility bills,” the bank study said. “This impacts lower-income households disproportionately and is another headwind at a time of weakening wage growth.”
Driving rates in Colorado are Xcel Energy’s multi-billion plans to expand its system to meet state greenhouse gas reduction goals, deal with wildfire risks and address emerging data center demand.
By the estimate of the PUC’s Blank the 13.82 cent per kilowatt-hour charge in 2024 will rise a minimum of 55% and as much as 72% by 2029. “I’m concerned that we’re fundamentally not on track to maintain affordability,” he said.
The $294 million Xcel is seeking to recoup in investments to the distribution system are part of a five-year, $5 billion plan to overhaul the network that connects homes and business to the grid.
This included replacing nearly 18,000 wooden poles and 18,000 transformers, 775 megawatts of new generation interconnections, 406 new circuit transmission miles and five new substations.
Xcel Energy makes the bulk of its money building infrastructure and adding it to its rate base boosting charges to customers.
“The company’s spending on infrastructure is unchecked and likely not the most efficient or targeted approach,” the UCA’s Pereira said.
Commissioner Megan Gilman said that while the upgrades to the electric system must be made, they have to be optimized and that Xcel Energy’s projections on load growth (how much electricity it needs) and plans to meet have fallen short.
“They have missed the mark in providing load curves and kind of a vision of the grid of the future that really gets to the optimization that is necessary to keep this affordable for customers,” Gilman said.
Rates proposed to increase almost 10%
The proposed rate increase would boost residential bills 9.9% with the average monthly bill for 601 kilowatt-hours rising to $110.04 from $100. In 2022, the average bill was $81.86.
The average small commercial bill would rise about 9.5% to $164.22 from $150 for 1,041 kilowatt-hours. Large commercial and industrial users would see rate increases of 7.3% to 9.3% depending on the amount of electricity consumed.
Even with the rate increase Kenney said that electricity’s share of total spending for a Colorado household would be about 1%, less than half the national average.
“Recognizing the costs can be a challenge for some of our customers, we will expand our electric and gas assistance programs, expanding the number of customers that are eligible to enroll in those programs,” Kenney said.
There are about 60,000 income-qualified customers in the utility’s program, which limits bills to 1.5% of income. The goal is to double the number of participating households, Kenney said. The customers will also avoid involuntary shut offs.
A program for income-qualified seniors could provide a bill credit of up to $20 a month. “So the whole goal with this whole menu of programs is to avoid energy crises,” Kenney said.
Xcel Energy is putting $5 million in corporate money toward the programs (and another $5 million toward helping with gas bills), but the major source of funding will be other Xcel customers as the company proposes doubling the energy assistance charge on bills to about $2.
About half of the average bill is for charges, called riders, above the base rate for things such as clean energy, transmission construction, energy efficiency and wildfire mitigation programs.