Is Xcel Energy making too much money? Colorado voters could get the chance to decide

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Hart Van Denburg/CPR News
Gas meters in an alley off Larimer Street in Denver’s RiNo district on Friday, April 24, 2021.

Colorado voters could have a rare chance to weigh in on their rising electricity bills this November. 

Jon Caldara, the president of the Denver-based Independence Institute, has proposed a ballot initiative that would force investor-owned utilities to return hundreds of millions of dollars of revenue to ratepayers. It takes particular aim at Xcel Energy, Colorado's largest power utility and a company leading a rapid transition to renewable energy across the state. 

Colorado Democrats have mandated the shift by passing legislation requiring the company to reduce its greenhouse gas emissions. Xcel Energy has promised to exceed those requirements by delivering 100 percent carbon-free electricity to its customers by 2050. 

To achieve the goal, the company has proposed almost $10 billion in new infrastructure projects across the state, which could lead to a building spree of transmission lines, wind farms and fields of solar panels. If regulators sign off on the projects, Xcel could recoup the costs from customers through energy bills for years to come — plus an additional profit for its shareholders.

Caldara said the focus on climate change undermines the bargain granting Xcel Energy a monopoly. If energy affordability is no longer the top concern for regulators, he thinks voters should have the chance to step in. 

"I have no problem with profit if there is competition," Caldara said. "Since they have risk-less profits, they're pillaging working families with massive rate increases and give it to their owners."

The proposed ballot measure, called Initiative 93, would require Colorado's investor-owned utilities — Xcel Energy and Black Hills Energy — to pay at least five percent of their revenues back to customers. The money would come out of each company’s profits. If it wins approval, state utility regulators will determine how customers are refunded.

The ballot initiative sets up a potential clash over the role of regulated monopolies in an era of rapid climate change.

Like many other states, Colorado grants Xcel Energy and other utility companies the exclusive right to deliver electricity or natural gas inside a defined service territory. The Colorado Public Utilities Commission then regulates those companies to provide low-cost, safe services aligned with the "economic, environmental and social values" of the state, according to its mission statement.

The so-called "regulated utility" model also sets strict limits on when a company can charge ratepayers. It allows companies to recover operating expenses like staff salaries and office rents, but it can't collect an additional profit. 

The situation is different when utilities charge customers for capital expenses, like new power plants or transmission lines. In those cases, utilities can recover the cost of the project plus an extra percentage determined by regulators. Those profits later become earnings for the company's shareholders. 

Joe Pereira, the deputy director of the Colorado Office of the Utility Consumer Advocate, said the model creates what's called a "capital bias."

"Basically, what it says is the only two ways for a utility to make money is to cut costs or to build stuff," Pereira said.

Pereira said Xcel Energy has proven adept at both tasks. The company's Colorado subsidiary, Public Service Company of Colorado, has more than doubled its net income from about $297 million in 2007 to $660 million in 2021, according to public financial filings. Its earnings in Colorado have also tended to outpace the revenue it makes in Minnesota, its other main service territory.

Meanwhile, Colorado regulators have approved a recent Xcel Energy proposal to raise electric rates. The Public Utilities Commission is also considering a natural gas rate hike and additional charges to cover the cost of natural gas price spikes during an extreme winter storm in 2021. 

If all three are approved, the company estimates the average monthly utility bill for residential gas and electric customers would increase by $16.48 by the end of the year. 

Leslie Glustrom, a retired biochemist and climate activist, said those increases come as the price to produce electricity drops from rapid improvements in wind and solar energy technology. She worries Colorado customers won't benefit from those savings because Xcel Energy is "gold-plating" its plans for new infrastructure projects, like its recently approved $1.7 billion Power Pathway transmission project on the plains east of Denver. 

"They're not passing the savings from the clean energy transition onto customers," she said. "Instead, they're finding ways to spend money, to drive up our rates, to drive up their profits and to drive up their earnings per share." 

If the trend continues, Glustrom said the Independence Institute ballot initiative — or something like it — could find a receptive audience among Colorado voters. 

Company representatives say there's a simple explanation for high profits: Colorado is growing and wants to battle climate change, both of which it says require spending on new infrastructure.

Hollie Velasquez Horvath, a regional vice president of state affairs and community relations for Xcel Energy, declined to comment on the ballot initiative until it’s finalized by Colorado election officials. If the Colorado Title Board determines the language meets state requirements, supporters would need to gather 124,632 valid signatures to earn a place on the 2022 ballot. 

When it comes to growing utility bills, Velasquez Horvath said Xcel Energy customers pay about 34 percent less for electricity than the U.S. average. Planned projects could push rates higher, but many of those investments are necessary to support new projects and meet Colorado's clean-energy requirements, Velasquez Horvath said. 

Some utility watchdogs see those statements as proof of the economic potential of renewable energy. Joe Smyth, a research and communications manager for the Energy and Policy Institute, said power companies have to pay for fossil fuels to generate electricity, but the wind and sun are free. 

As monopoly utilities transition to cheaper power, he said the role of regulators should be to make sure those companies don't game the system to exclude ratepayers and communities from the benefits of cheaper energy sources.

But Smyth is skeptical about the Independence Institute’s ballot initiative, given the group’s past relationships with the fossil fuel industry. Last year, his organization investigated the Coalition of Ratepayers, a group established by the Independence Institute that sought to object to Xcel Energy's efforts to close two coal power plants. Documents obtained through open records requests revealed a group linked to the Wyoming coal industry was helping to finance the effort. 

Utility regulators later rejected the Coalition of Ratepayers from intervening in debates over the future of the coal-fired power plants.

Caldara insists his ballot initiative is designed to protect ratepayers, not fossil fuel interests. He said no oil, gas or coal company is "directly helping us with this ballot initiative."

"All that said, we'd be very honored and happy to receive lots of money from oil and gas companies — if only the cheap bastards would give it," Caldara said.