Proposal would trim Xcel’s sails, start pushing back on natural gas expansion, but falls far short of the major overhaul that some believe is needed
by Allen Best
Xcel Energy’s high and wide sails will almost certainly be trimmed by Colorado legislators. SB23-291, the bill crafted in response to spiking natural gas prices this winter, will impose small steps to protect consumer interests.
What this bill won’t do is make Colorado’s largest utility as innovative in this energy transition as it is successful in generating profits for its investors.
The company reported $727 million in profits from its Colorado operations in 2022. Investors in the company’s eight-state operating region earned yields of more than 9%.
Customers were chilled even more during this winter of uncommon cold by natural gas prices that pole-vaulted 75%. Xcel and other utilities protested that they were merely passing along costs.
State legislators leveraged the unhappiness into an investigation of long-standing complaints. Critics have long contended that investor-owned utilities enjoy an uneven playing field at the Colorado Public Utilities Commission, the state agency governing Xcel, Black Hills Energy, and other investor-owned utilities.
The bill’s most important provision would allow the PUC to “consider requiring each investor-owned electric utility to bear a percentage of its total fuel costs in order to incentivize the utility to find efficiencies and reduce fuel waste.” In other words, it puts the company’s own skin in the game. It might heighten accountability.
Senate President Steve Fenberg, a Democrat from Boulder who headed the select committee, said the proposal would not dramatically alter the compact between monopoly energy utilities and consumers. Utilities enjoy monopolies in their service territories, assuring a steady stream of revenues – and profits. State regulators must oversee reliability, affordability and, in recent years, pollution reduction. Fenberg told Senate Finance Committee members that the changes amount to “tweaks” to the regulatory compact.
This bill has disappointed some consumer advocates but stretches hard to achieve a goal of key environmental groups by challenging the expansion of natural gas.
At the committee hearing, Robert Kenney, the president of Xcel’s Colorado division, warned of unintended consequences. Others summoned by the company from Grand Junction to Pueblo to Greeley described a dark picture of hindered economic development or worse. State Sen. Barbara Kirkmeyer, a Republican from Weld County, as she had in the committee hearings in March, challenged Fenberg repeatedly, asking him what this would accomplish to lower consumer bills. Instead of immediate results, he pointed to long-term savings.
Many said that that this bill endangers Xcel’s access to capital to do good things such as its developing emerging hydrogen and geothermal resources. This argument was thin. What more reliable income stream could Wall Street want than that of a monopoly responsible for essential goods and services?
This is from Big Pivots 73. Please consider subscribing. Even more pleasing would be a donation.
The natural gas elements have provoked the noisiest opposition. The PUC and Colorado Energy Office would be required to study implications of existing policy that allows utilities to bill existing customers of natural gas lines to pay for expansion of gas lines to new homes and buildings.
Defenders of the policy compared this to extensions of water, sewer, and electric lines, which are also socialized. True. But for Colorado to achieve its mid-century emission reduction goals, it cannot continue expanding natural gas lines to tens of thousands of new homes each year. Meera Fickling of Western Resource Advocates told legislators that gas lines laid in 2023 won’t be paid off until 2080. We need to be more strategic in our investments, she said.
We have alternatives. Electric-powered air-source heat pumps can heat water and buildings in temperatures of down to 22 below zero. They can also cool buildings. Their higher upfront cost will be recouped decades before the mortgage is paid. For new construction, it should be a no-brainer.
Natural gas is also threatened by a provision that would require state regulators to apply a discount rate that, in its long-term consequence, might make natural-gas generation for electricity less economically attractive. Xcel has major plans for natural gas plants.
Energy visionary Amory Lovins decades ago said that consumers don’t care about the energy itself, only the service it delivers. They want their beer cold. It’s just not generating electrons that matters. As we decarbonize, demand-side management and the more wonkish programming of satisfying needs will become far more important.
Xcel has shown it can build big wind and solar projects, as it once built big coal plants. This comports with the regulatory compact that allows the company to reap substantial profits with small risk. To its credit, Xcel is also working on new battery technology, hydrogen and other wrinkles of the energy transition.
But in the customer-interface area, Xcel has been unremarkable. I remember a rare reprimand from the PUC commissioners several years ago when reviewing an Xcel demand-management program at Denver’s Central Park neighborhood. Boulder was to be a demonstration project for innovation. So far, I’ve heard nothing.
Critics say the incentive motive of these investor-owned utilities blinds them to more creative solutions. Companies wanting to earn profits usually must innovate. Monopolies have less incentive to innovate, because they don’t face competition. This bill won’t change that.
Why support Big Pivots?
You need and value solid climate change reporting, and also the energy & water transitions in Colorado. Because you know that strong research underlies solid journalism, and research times take.
Plus, you want to help small media, and Big Pivots is a 501(c)3 non-profit.
Big grants would be great, but they’re rare for small media. To survive, Big Pivots needs your support. Think about how big pivots occur. They start at the grassroots. That’s why you should support Big Pivots. Because Big Pivots has influence in Colorado, and Colorado matters in the national conversation.
- K.C. Becker taking helm of COSSA - March 18, 2025
- Troubles among Colorado utilities - March 12, 2025
- Lines across eastern Colorado - March 12, 2025
Where is the data for heat pump efficiencies at sub-zero temperatures?
Some people talk about heat pumps like they are a magical way around the second law of thermodynamics, but the only way a heat pump can heat a house when it’s cold outside is to consume energy.
Gas furnaces are 95% energy efficient. How do heat pumps compare in very cold weather?
If air-sourced heat pumps were “no-brainers” everybody would want one on their home and demand would skyrocket.
To answer my own question I went to the Authority on All Things (TM), chatGPT :-).
Prompt: Do you have any examples of heating homes in Colorado with a heat pump versus a gas furnace that is 95% efficient or more?
Response:
Yes, I can provide some examples of heating homes in Colorado with a heat pump versus a gas furnace that is 95% efficient or more:
A study conducted by the Northwest Energy Efficiency Alliance (NEEA) compared the operating costs of air-sourced heat pumps and high-efficiency natural gas furnaces in a variety of climates, including Colorado. The study found that in a cold climate zone such as Colorado, a high-efficiency natural gas furnace can be more cost-effective to operate than an air-sourced heat pump, assuming similar upfront costs for both systems.
In a study conducted by the National Renewable Energy Laboratory (NREL), researchers compared the heating costs of an air-sourced heat pump with a seasonal performance factor (SPF) of 3.0 to a high-efficiency natural gas furnace with an efficiency of 95%. The study found that the heating costs of the heat pump were lower than the natural gas furnace in most scenarios, but the difference in operating costs was relatively small.
A homeowner in Colorado shared their experience on the website Energy Vanguard, where they replaced their high-efficiency natural gas furnace with an air-sourced heat pump. The homeowner reported that they saw a reduction in their heating bills with the heat pump, but the savings were not significant enough to offset the upfront cost of the heat pump installation.
These examples suggest that the choice between an air-sourced heat pump and a high-efficiency natural gas furnace will depend on a variety of factors, including the specific characteristics of the home and the climate zone. A professional heating and cooling contractor can provide a more detailed analysis of the costs and benefits of each heating system option.
So air-source heat pumps aren’t nearly the “no-brainer” that you claim.
I guess I need to read the legislation, but this seems like a roundabout way to address volatility and potential failure of supplies in the gas market, while kinda, sorta, maybe disincenting new gas connections. I guess this is what some call the “sausage making” of legislating.
As far the claim that water and sewer extensions among others are “socialized” so gas should be too; I just looked at the water & sewer tap fees for my town. $13,000 for a typical new detached home. Black Hills’ service extension construction “allowances” are a tad inscrutable, but depending on what they count, that initial charge that a builder or developer sees apparently could be nothing or minimal, or they could pay over time via low-interest loan payments, or use minimum monthly payments.
I agree that this bill only offers a few tweaks that may impact future electricity rates a little around the edges. However, the root cause of high rates is the lack of competition in the wholesale electricity sector and misaligned financial incentives between ratepayers and utility shareholders, as Allen Best correctly suggests.
A true long-term solution would be the introduction of competition and choice of electricity provider as an option for Colorado communities, which is known as Community Choice Energy (CCE). With CCE, communities or groups of communities can choose alternative wholesale electricity suppliers while the incumbent IOU continues to own and operate its distribution system to deliver the electricity. If communities have a choice, then utilities would be forced to work harder to prove that they can give communities what they want better than other suppliers, be it cheaper electricity, faster decarbonization, or better energy programs.
CCE is very successful in other states, and is growing very rapidly in California. There is strong evidence that CCE would save customers money. Authorizing CCE in Colorado is a true long-term solution for high rates and lack of innovation in decarbonizing our electricity supply. A bill has been drafted for 2024, but it needs greater support from communities and legislators before it can prevail against the entrenched and powerful forces of the outdated monopoly system.