Xcel Energy submits plans to raise rates and expand natural gas service

Joe Wertz/CPR News
A gas stove heats up a pot.

Xcel Energy has asked Colorado regulators to raise its natural gas rates over the next three years, an increase the company said will allow it to deliver reliable home heat without locking in decades of additional climate-warming emissions. 

The company, which serves 1.4 million natural gas customers across the state, submitted the proposal to the Colorado Public Utilities Commission Monday. If approved, it would raise an average residential customer's natural gas bills by about $4 in November 2022, adding $107 million in annual revenue. Smaller increases would follow in 2023 and 2024.

The funding will help finance miles of new natural gas pipelines across the state, including large-scale reliability projects in Blackhawk, Granby and Winter Park. It would also let the utility replace 35,000 gas meters per year and continue to expand its customer base to new Front Range developments.

The proposed rate increase comes as climate change has set off a fierce political battle over how residents cook and stay warm. Last month, New York City banned natural gas hookups, essentially requiring electric stoves and furnaces in newly constructed buildings. The strategy is meant to make sure new homes and businesses are powered by solar, wind and other more climate-friendly energy sources. 

Deep blue cities in Colorado have adopted a less aggressive strategy. Both Denver and Boulder have enacted building codes that encourage a more gradual transition away from fossil fuels.

Behind those efforts is a growing scientific concern about natural gas, which is primarily made of methane. When the fuel burns, it doesn't produce as much carbon dioxide as oil or coal, but not all gas makes it to a burner tip. Methane leaks when natural gas is drilled and transported. Scientists say those releases can supercharge global warming because methane is 84 times better at trapping heat than carbon dioxide over a 20-year period.

Methane’s potency led the United Nations to release a report last year calling for an urgent crackdown. The authors concluded adding new natural gas infrastructure wasn't compatible with international climate targets "without relying on future massive-scale deployment of unproven carbon-removal technologies." 

Xcel Energy's proposal asks Colorado utility regulators to ignore the recommendation. In written testimony to the commission, Brooke Trammell, a regional vice president, argued that additional investments in expanding fossil fuel infrastructure wouldn't challenge the state's plan to reduce its contributions to climate change. In fact, it should be seen as "a leading climate strategy." 

"At this time, there are no viable, at-scale, alternatives to natural gas use that both reduce emissions and still provide customers with the energy they require to stay safe and comfortable at home," Trammell said. 

Federal data shows 70 percent of Colorado homes rely on natural gas for home heat. The Minnesota-based company has promised its natural gas system will have net-zero greenhouse gas emissions by 2050, a pledge it plans to achieve with investments in certified low-emissions natural gas, leak detection and methane recovered from sewage or other sources. It also sees promise in novel technologies, like mixing hydrogen into the existing gas supply.

In his own testimony, Jeff Lyng, Xcel Energy’s director of energy and environmental policy, pushed back against arguments for a rapid shift to all-electric home heat. In 2020, the company delivered the equivalent of 23,500 megawatts of electricity generation through its gas system. To meet the same demand with electricity, he said its Colorado operation would need three times its current peak electric capacity.

Lyng also warned that a rapid switch to electricity could hurt low-income customers. If wealthy residents pay to cut off their natural gas service, less well-off customers could be stuck with the increased costs of maintaining the system. 

Environmental advocates are skeptical. Ean Thomas Tafoya, the state director of environmental justice group GreenLatinos, said Xcel's concerns about affordability don’t account for other policies that help communities afford to move away from natural gas. 

"Low-income communities want to be part of the just transition," Tafoya said. "To do that, they need access to resources, including down payment assistance and tax incentives." 

Leslie Glustrom, a biochemist who helped found Clean Energy Action, said she doubts Xcel can move to unproven technologies like hydrogen. As climate change intensifies, she fears large parts of the natural gas system could become assets without any source of future revenue. 

"Xcel tries to hide behind the hydrogen promise, but if you drill down you'll find it's unlikely to work at a price that matters," Glustrom said.

The request for the rate increase comes as Xcel and other natural gas utilities face new requirements to reduce the climate impact of their systems. Last year, Gov. Jared Polis signed legislation setting a "clean heat standard" that requires gas utilities to cut emissions 4 percent by 2025 and 22 percent by 2030. Both targets are set against 2015 emission levels. 

Xcel must submit its plan to meet the requirements next year. The process will allow utility regulators to study whether proposed plans will achieve real emission reductions.

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