DENVER — When rates increase, customers turn up the heat on Xcel Energy.
Just look at 2023. Coloradans watched their charges balloon and demanded to know why, and perhaps more importantly, what could be done about the elevated rates.
People took their outrage to state regulators and got the attention of lawmakers, who passed legislation addressing energy bills in Colorado.
And 9NEWS reporter Marshall Zelinger read through more than a thousand of your emails, prompting months of reporting -- starting with what's on your bill and why.
As Coloradans prepare to once again turn up their thermostats for the winter, let's break it all down.
By the way: If you have a question about Xcel Energy billing, email it to marshall.zelinger@9news.com.
What goes into an Xcel Energy bill?
Probably no surprise here, but the biggest charges on your Xcel bill are related to the cost of generating and using electricity and natural gas. The prices of both drove the skyrocketing bills customers got in early 2023, particularly because the cost of natural gas rose; natural gas is purchased by Xcel and that cost is passed down to us dollar-for-dollar.
But Xcel bills include other charges. To list just some:
- Service and facility: Charges for the meter on your home, having the meter read, customer service.
- RETOU On-Peak | RETOU Mid/Pk/Shoulder | RETOU Off-Peak: Usage charges.
- ECA (Electric Commodity Adjustment): The cost of the fuel used to generate the electricity you use.
- Interstate Pipeline: This is a charge covering the cost for how Xcel moves gas onto its system.
Take a minute to look at out our full line-by-line explainer here. Without it, would you even know what all those codes meant?
Jack Ihle, Xcel Energy's regional vice president of regulatory policy, told Marshall that the actual bills are probably not written as simply as they could be, but also said providing that full list on each bill is also about providing transparency.
When Marshall sat down with Ihle, he asked about why some of these charges exist in the first place. For example:
MZ: "On the first [billing] charge, 'service and facility' -- at some point, haven’t I paid off the equipment that’s on my home that that number should go down? Or, I heard I’m paying for customer service. Isn’t that an expense of Xcel? Why am I paying for Xcel to employ customer service through the 'service and facility' charge?"
JI: "It’s partially capital, meaning the cost of the meters, those depreciate over time, they need to be replaced. It’s averaged across all the customers, so every year we’re going to replace new meters. So, there’s always an ongoing cost. We have 1.5 million of these meters out there, part of that is becoming smart meters, those are turning over now, but they will depreciate, wear out. There’s a certain amount of those meters that will be replaced every year, so that cost is ongoing. The cost to maintain the support systems, like customer care accounts, that’s ongoing as well. That doesn’t come for free to us, and so we do seek to recover those costs from customers."
Additionally, customers' smart meters could impact their final bills. Xcel, and other utility companies, can charge more for electricity on weekday afternoons and early evenings because of those meters. Customers do have the choice between flat rate and time of use billing, but as Marshall found in July, the different billing systems aren't meant to save customers money.
Why can't Xcel store gas to use at a later time when prices increase?
There are two main reasons for the big bills at the start of 2023: The price of natural gas went up and because of colder temperatures, energy usage likely went up, too.
Erin O’Neill, the chief economist for the Colorado Public Utilities Commission (or PUC, which we'll get into soon), told us in January that the cost of natural gas went up by about 40% from 2022.
When state lawmakers began considering the legislation to address energy bills this year, State Sen. Barb Kirkmeyer (R-Brighton) asked O'Neill why Xcel doesn't store gas for times like this.
"Gas is somewhat storable, unlike electricity, which is really hard to store, but we don't have huge storage reserves in the state of Colorado," O'Neill said. "Some utilities have more than others, but there is a limit to what a company can purchase and put in storage. So while gas prices are really low right now … there isn't enough storage, to sort of, put it in the ground now and wait and use it next winter, there's not physically that much storage."
Xcel's profit
In January 2023, Xcel CEO Bob Frenzel told investors that 2022 was a "very successful year." Just how successful? The 2022 net income was $1.736 billion. That's an increase over the 2021 net income of $1.597 billion.
If natural gas costs go to customers at the market rate, Xcel's getting its profit elsewhere. In a lengthy statement provided to Marshall, Xcel media relations told us the company invests in infrastructure -- from natural gas pipelines to solar and wind facilities.
Colorado state regulators, the PUC, approve the investments. Through PUC approvals, Xcel is guaranteed a rate of return on capital investments. When the PUC approves rate increases, it includes a profit for Xcel.
“They’re only allowed to get profits on things they build,” said Ian Lange, director of mineral and energy economics at the Colorado School of Mines. “They really want to build stuff. They’ll be saying ‘Hey, we need to build all these things.’ And they’re less excited about things that don’t require building.”
Ihle told Marshall that the company can't reduce the costs of gas and electricity beyond market rate because rates will go up if it becomes a risk to operate. Customers could then look at executive salaries and argue that's an area where there is potential to cut costs.
Frenzel took over as CEO in August 2021. He received $8.3 million in total compensation that year, with a base salary of $931,424.
"It's the same argument you could make to people at Walmart. You could say, instead of passing on these higher costs that you're incurring because the goods that you're selling at Walmart are going up in cost, instead of increasing those prices to me, why don't you just keep the price to me the same and reduce the CEO's compensation or executive compensation?" said University of Denver finance professor Mac Clouse.
"It could be done in Xcel's case as well, but Xcel has a little bit of a different case because they're allowed to earn a rate of return because of the regulation, as opposed to Walmart, which is in a competitive industry. And the return they earn is whatever they earn as a result of their performance."
The lack of competition made viewers question why the company advertises itself.
Who regulates Xcel's charges?
The PUC does. When Xcel wants a rate increase, they have to bring a rate case to the PUC, which goes through an Xcel request line by line.
Rate cases happen about every two years, and they're kind of like a game of leapfrog. A utility company wants customers to pay it back for expenses it already invested in the previous year, while paying for future investments over the next year.
“What’s the right balance between reliability and cost? Between environmental protection and pollution? There’s a balance. We don’t go after perfection here. We’re trying to find a balance between competing values,” said former PUC Commissioner Ron Lehr, who was appointed to the PUC by Gov. Dick Lamm and has been off the PUC since 1991.
Marshall asked O'Neill about the 2023 rate case. She said it's uncommon for the PUC to reject a whole rate case, but they do say no to pieces of a request. There are plenty of elements they consider.
"All of those factors go into what the commissioners are trying to decide of how much is enough profit to keep them as a healthy corporation that can go to the market and access financing at a reasonable rate," she said.
Anyone is allowed to share feedback with the PUC during the rate case proceedings. We saw that many times this year, as customers shared their anger and frustrations.
And when the PUC meets for a rate case, they also hear from the Office of Utility Consumer Advocate (UCA). Think of them as the ratepayer's public defender. You can also contact them with your concerns.
“Our office doesn't have a profit motive. And so what we're trying to do is get the most just and reasonable rates based on the evidence," said UCA Deputy Director Joseph Pereira.
By the way, Xcel was allowed to pass along the cost of its legal team. Specifically, customers had to pay for the lawyers Xcel hired to ask Colorado state regulators for increases. That just changed (see below).
State law
Colorado lawmakers couldn't ignore this year's prices and the subsequent outrage. Gov. Jared Polis (D) wrote a letter to regulators and energy companies in February. Among other things, he told the Colorado Energy Office to improve building performance standards so that customers could save on energy use and directed state agencies to "actively purse all opportunities to reduce the energy cost burden." Though much of his plan was long-term.
The legislature also passed Senate Bill 291, a utilities bill that limits costs utilities like Xcel can pass on to their customers. It's the end result of a Joint Select Committee established to investigate high utility rates and legislative solutions, headed by State Sen. Steven Fenberg (D-Boulder).
The new law means you won't be charged for things like legal fees for Xcel's legal battles and certain advertising expenses anymore. Xcel won't be able to pass along costs for lobbying or political donations, either.
Marshall Fire
A 17-month investigation into the most destructive wildfire in Colorado history found that the Marshall Fire that in Boulder County in 2021 was actually a combination two fires.
One started on the property of Twelve Tribes just north of Highway 93 and Highway 170 from burning that happened and reignited. The other, according to the investigation, likely started when an unmoored power line caused hot aluminum particles to start a fire just south of Highway 93 and Highway 170.
With Xcel facing multiple lawsuits because of the Marshall Fire, many viewers asked if Xcel customers will have to pay for the company’s legal defense and any possible legal settlement. The new law does not address hiring outside legal help to fight lawsuits related to events like the Marshall Fire.
The new law also does not address utility companies trying to pass along costs related to a legal judgment or any damages determined in court.
Two former PUC commissioners told 9NEWS that Xcel would have insurance to cover certain amounts of liability. Payment for the insurance coverage in the first place can be passed on to customers.
If Xcel had to pay any legal judgment, it would come from the insurance policy.
What happens if Xcel had to pay a judgment larger than the insurance policy covers? If the company wanted to pass it on to customers, it would first have to be presented to and approved by the PUC.
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