Xcel Will Give Customers a Break Next Month, Then Ramp Up Gas Bills

Xcel Energy has pledged to help customers save an average of $33 next month, while also agreeing to spend $32 million on a natural gas expansion plan — money that it will recuperate from those same customers.

The Colorado Public Utilities Commission approved the gas expansion plan on November 16, vowing to examine future planning of the state's gas infrastructure. The day before, Xcel had filed an interim fuel price adjustment with the PUC to help customers save an average of $33 on their gas bills in December.

Customers pay the actual commodity price of natural gas on their bills. Every three months, utilities submit commodity adjustments to the PUC based on how much they spent on natural gas. Xcel did so on October 1 but, owing to a decrease in natural gas prices nationwide, then filed an interim fuel price adjustment to deliver savings to customers immediately rather than waiting for the next adjustment, which would normally hit in January.

“I tip my hat to them,” says Cindy Schonhaut, director of the Office of the Utility Consumer Advocate, which supports the interests of the public in utility regulation. “Instead of waiting for next quarter, they’re looking to adjust the cost now. That is a benefit to consumers going into the cold weather right now, and we really appreciate that.”

But — and there’s a very big but — Schonhaut also notes that these savings to customers would have come in some shape or form anyway, and don't impact Xcel’s bottom line. And there are other items that will hit consumer bills in the coming month, such as a successful Xcel bid to the PUC to raise gas rates that will cause bills to be higher starting as soon as the next billing cycle for some customers.

“It’s the fuel cost and the national gas supply market that Xcel has no control over in this case,” Schonhaut explains of the gas price adjustment for December. “What they are asking for more money on, they do have control over, because it’s money they spent, and then they’re asking customers to pay them back.”

One of those expenses over which Xcel has control came up at the PUC meeting on November 16: its gas expansion plan for the west metro Denver area, where Xcel has asked to expand the capacity of the gas system to power increased demand from new construction, adding additional gas pipelines in Denver, Edgewater and Lakewood.

Earthjustice, an environmental law nonprofit, represented the Southwest Energy Efficiency Project in opposing the plan, arguing that the company needed to analyze non-pipeline alternatives further and consider whether gas expansion is compatible with the state’s climate goals rather than going all in on the project. Xcel had initially asked the PUC to consider the plan in October 2021.

In 2019, the Colorado Legislature passed a bill designed to reduce greenhouse gas emissions 90 percent by 2050. Colorado also has a greenhouse gas road map that calls for decarbonization of the building sector by that date. And in 2021, legislators passed a clean heat plan law that will require utilities, including Xcel, to file clean heat plans that will create a 4 percent reduction below 2015 greenhouse gas emission levels by 2025 and 22 percent below 2015 greenhouse gas emission levels by 2030. The PUC is formalizing rules for that process now.

According to Earthjustice, although Xcel did consider non-pipeline alternatives, that analysis was inadequate because it focused solely on the cost of such alternatives while ignoring the climate benefits. Justin Brant, utility program director for SWEEP, says the organization is concerned that expanding the gas system in Denver isn’t cost-effective; gas pipelines can last over fifty years and will be extremely underutilized long before then if the state reaches its climate goals.

“Investing in that type of infrastructure right now, that's likely not still going to be useful before it's paid for by customers," he says. "It's just a waste of money."

Homes are getting more energy-efficient, Brant notes, replacing gas heating with electric heat and gas appliances with electric ones. Other modifications, such as better windows, help, too.

Along with SWEEP, PUC staffers and Schonhaut’s office opposed the project, citing similar concerns. But the PUC ruled that it had to look at the case narrowly rather than using it to tackle broader questions about the gas system in the state. And while commissioners expressed reservations about the project, they ultimately agreed to approve it.

Schonhaut says that her office was concerned with both cost and environmental issues, finding that Xcel calculated the amount of gas needed in the area improperly. Not just those who live in the west metro area will pay, she points out: all customers will.

Xcel calculated the amount of expansion based on capacity needs, Schonhaut notes. Capacity in this case represented the potential maximum amount of gas needed to serve every customer if they turned their furnaces all the way up on the coldest day of the year.

“But not every house cranks the furnace to the absolute maximum. They may have energy-efficient windows, be out of the home, or only need some rooms to be warm,” Schonhaut says. ”Demand is how much do people really use, and that can be studied by objective engineers.”

As the utility consumer advocate, she objected to the expansion because it should have been based on demand rather than capacity, resulting in a smaller impact to customer bills, she says.

Brant, who agrees that full capacity won’t be needed, offers another reason: Xcel looked at past numbers to determine capacity when the future will be different, calculating that peak demand in the area will grow by 4.4 percent annually based on data from 2019-2021. SWEEP argued that the company should have considered policies decreasing energy usage, and particularly gas usage, in its calculation of how much expansion was needed

“The company essentially looked backwards and projected that what's happened in the past is going to continue into the foreseeable future,” he says. “Given what the state, and the City of Denver in particular, have proposed, and are doing, around reducing greenhouse gas emissions, that just seems like a terrible assumption. It’s that type of thinking that locks us into poor decision-making.”

Brant sees the affirmative ruling by the commission as a missed opportunity to veer from a business-as- usual approach to gas and instead look into how to save customers money.

The Colorado PUC isn't alone in the difficult task of tackling a changing gas system, however.

Schonhaut says she’s heard of similar struggles from utility consumer advocates in other states. “The problem becomes stranded assets,” she says. “These pipelines won’t be used as long as they were built to last. Hundreds and millions of dollars, maybe even billions, in this state alone will go toward assets that could be retired before normally expected lifespans.”

Brant is optimistic on one point: He sees the agreement between environmental advocates, PUC staffers and Schonaut’s office — and the commissioners' reservations about the Xcel proposal — as a hopeful sign of better gas policy in the future.

Xcel did not respond to Westword's requests for comment on the gas expansion plan.