Xcel Energy has recently filed a plan for a $312 million rate increase in electricity prices. However, following negotiations with various parties, including state regulators, consumer advocates, and municipal governments, the figure has been reduced to $45 million. The negotiations were prompted by consumer outrage over rising utility bills, which led to concerns from legislators and a new law addressing the ratemaking process. The proposed increase would affect the average residential bill, raising it by $1.54 or 1.7% to $91.60 a month.
The settlement also includes caps on the amount Xcel Energy’s Colorado subsidiary, Public Service Company of Colorado (PSCo), can charge for attorney and consultant fees related to seeking the rate increase, as well as executive bonuses. The Colorado Office of the Utility Consumer Advocate, representing consumers and small businesses, supports the settlement agreement, stating that it will result in just and reasonable rates.
However, the City of Boulder, one of the negotiating parties, believes that the increase is still too high and plans to challenge the settlement during the hearings at the Colorado Public Utilities Commission (PUC). The City of Boulder questions whether Xcel Energy needs a rate increase at all, considering that the company posted record profits of $1.74 billion in 2022.
Xcel Energy, the largest electricity provider in Colorado with around 1.5 million customers, initially requested a 10.5% guaranteed return on its investment and the use of future cost estimates in calculating revenue requirements. Under the settlement, the company will receive a 9.3% return on investments and continue to use past, established costs, known as a historic test year.
In addition to the rate increase, there are two other debated issues. The Utility Consumer Advocate proposes deferring $48 million in costs associated with the closure of five coal-fired power plants until the last plant, Comanche 3, in Pueblo is shut down in 2031. However, the PUC staff disagrees and wants to include these costs in the rate hike. Another dispute concerns adjustments to transmission costs, which could increase the rate hike by an additional $1 on the average monthly bill.
The PUC hearings, where the settlement will be discussed, commenced this week and will run for several days. The City of Boulder plans to challenge the settlement during the hearings. Members of the public are also given the opportunity to provide comments via Zoom.
It remains to be seen how the hearings will unfold and what impact they will have on the final decision regarding Xcel Energy’s proposed rate increase.
