Colorado lawmakers grill utilities about high bills while profits soar

As Colorado legislators and officials from the state’s regulated utilities sorted through ways to avoid a repeat of this winter’s huge increases in heating bills, one lawmaker asked how to square the soaring rates for customers with reports of big profits for the companies.

“Why are we simultaneously living in a time when people are struggling the most to pay their energy bill and at the same time the utilities are making the most profits they’ve ever made?” asked Senate President Steve Fenberg, chairman of the Joint Select Committee on Rising Utility Rates. 

“I think why we’re here today is that sort of disconnect, at least the way it feels in the average person’s mind,” Fenberg said in a hearing Tuesday, the committee’s second.

Starting late last year, utility customers across Colorado saw their heating bills spike, many at least doubling from the previous year. Natural gas bills shot up after the wholesale prices that utility companies pay rose substantially.

The committee of Senate and House members is investigating the steep jump in heating bills prices that unleashed a torrent of complaints on elected officials, utility companies and regulators. Agencies that help people with their energy bills were flooded with calls.

The bipartisan committee’s goal is to recommend legislation or other steps to prevent future price shocks.

Staffers from the Colorado Public Utilities Commission and the state Office of the Utility Consumer Advocate spoke last week in the committee’s first hearing. Cold weather and high wholesale natural prices were major drivers behind the skyrocketing bills, said Erin O’Neill, the PUC’s chief economist.

Typical gas bills increased about 75% this winter compared to 2021. Electric bills rose about 25%.

Since then, Xcel Energy-Colorado President Robert Kenney said wholesale natural gas prices have dropped and the company has filed notices with the PUC to reduce customers’ rates four times in the past few weeks. The average residential gas bill has declined roughly 40%, Kenney said in Tuesday’s hearing.

Regulated utilities like Xcel pass through fuel price increases and decreases to customers. They don’t make a profit off higher fuel prices.

However, the utilities can request rate increases and are allowed to cover such costs as building new power plants and pipelines, maintaining equipment and other operating expenses. And the PUC authorizes a certain rate of return on utilities’ assets, return on equity.

Xcel Energy in particular has come under fire for its reported profits as inflation has driven up energy and food costs. Xcel Energy, which is based in Minneapolis and serves eight states, reported $1.74 billion in profits for 2022, up 8.75% from 2021. The company’s net profits in Colorado were $727 million, up from $660 million in 2021.

Kenney and Nick Wagner, a vice president with Black Hills Energy, said utilities compete with other companies to raise money to pay for infrastructure and to cover expenses.

“What we do takes a significant amount of money. There is competition in the market,” Wagner said.

Kenney said a utility’s ability to attract investors allows it to provide safe, reliable service and make the transition to more renewable energy. “It’s that very ability to attract capital at favorable rates that allows us to be able to implement the policies that we’ve all said we prioritize.”

Kenney and Wagner said the ability for utilities to recover the costs of securing additional underground storage for natural gas would help blunt the impact of price spikes because they could buy more fuel when prices are low.

Another strategy would be approval of multi-year rate increases, which would provide more certainty and result in fewer rate cases at the PUC, Kenney said.

Last year, the PUC rejected a proposal to approve gas rate increases over three years. There was concern about increases based on projected rather than historic costs.