October 27, 2022
DENVER — The Colorado Public Utilities Commission denied Xcel Energy-Colorado’s $188 million request for gas base rate increases at its Oct. 25 meeting. Western Resource Advocates (WRA), Southwest Energy Efficiency Project (SWEEP), and the Natural Resources Defense Council (NRDC) opposed Xcel’s request, which would have raised average residential gas bills by 13%.
Xcel’s $188 million request would have covered the revenue requirement associated with projected spending on gas pipeline assets through 2024. The commission instead approved a pared-down increase of $64 million, which allows Xcel to recover costs already incurred through the end of 2021, but not those projected for 2022 onward.
“Xcel asked for approval to recover hundreds of millions of dollars of future spending on expensive fossil gas infrastructure that is out of line with the state’s climate goals,” said Meera Fickling, senior climate policy analyst at WRA. “We strongly oppose investments that would raise gas rates in the short term and risk making the state’s clean energy transition much more expensive in the long run.”
Despite a law requiring Xcel’s gas utility to reduce its greenhouse gas emissions by 4% by 2025 and 22% by 2030, Xcel’s gas sales to residential, commercial, and industrial customers in Colorado increased between 2018 and 2021. And Xcel has proposed even higher annual fossil gas infrastructure spending in 2023 and 2024 than it spent on average in the past 10 years. This system growth would increase the difficulty of meeting those greenhouse gas targets. Additionally, it would increase stranded asset risk — the risk that the utility’s infrastructure may no longer be useful in a lower-carbon future, even as remaining ratepayers are stuck paying it off.
“With this decision, the Colorado Public Utilities Commission has signaled that business-as-usual spending on natural gas infrastructure is not compatible with the state’s decarbonization goals,” said Justin Brant, utility program director at SWEEP. “We look forward to working with the Commission and Xcel on charting an equitable path towards gas system decarbonization in the coming years.”
As part of its 2022 Gas Base Rate increase application, Xcel introduced a Net-Zero Vision for natural gas. WRA, NRDC, and SWEEP submitted testimony demonstrating that the utility’s Net-Zero Vision would result in ongoing, risky investment in gas infrastructure while overlooking opportunities for direct emissions reductions from no-regrets options like electric heat pumps for space and water heating in buildings. Xcel’s Net-Zero Vision is over-reliant on dubious solutions, such as carbon offsets, that would not help the utility meet its climate targets in Colorado.
Although the Colorado Public Utilities Commission’s decision did not directly address the Net-Zero Vision, commissioners did note a potential future decline in fossil gas use, along with recent commodity price increases, as reasons for denying Xcel’s rate increase request.
The Commission’s decision will raise the average residential gas bill of Xcel customers by 3%. These increases will come on top of a 54% increase in gas commodity costs slated to come this winter. Xcel customers have already experienced rising gas bills this past year.
Most of these bill increases are due to a sharp rise in the commodity cost of natural gas, whose wholesale spot price has jumped roughly three-fold since the spring of 2021 due to global events. However, Xcel’s 2022 Gas Rate Case evaluated rate increases due not to rising gas costs, but rather spending on additional gas pipe infrastructure.
“Approval for millions of dollars in future cost recovery would have given Xcel an incentive to spend more on fossil infrastructure that will become obsolete in a low-carbon economy, leaving ratepayers holding the bag,” Fickling said.