Colorado has had a chilly winter compared to recent decades, but the larger question triggered by the rising utility bills is how the state’s 5.8 million residents will stay warm in coming decades. I see this story as being mostly about the future of natural gas.
Utility bills from November and December that in many cases were double those of the previous year have outraged many Coloradans.
Much of the heat was vented at Xcel Energy, the state’s largest utility with 1.4 million gas customers and 1.5 million electric customers. Black Hills Energy has 192,000 customers and Atmos has 120,000 customers. Other residents are served by municipal utilities or, particularly in rural areas, burn propane.
Natural gas explained 80% of the increase on an average utility bill, according to research by the Colorado Public Utilities Commission staff. Gas prices surged, caused largely by supply disruptions caused by Russia’s war against Ukraine. Prices have now moderated, but were responsible for 34% of bill increases.
Uncommon cold explained another 30%, according to the PUC staff research. For example, temperatures at Denver’s Central Park averaged 8 degrees colder than the year prior — which, by the way, was the second warmest since record-keeping began in the 1930s. The station was then called Stapleton Airport.
Russ Schumacher, the Colorado climatologist, says heating degrees days, a measure of the energy needed to heat buildings, rose 30% at Central Park. Xcel said its customers in Colorado used 35.5% more gas in November and 31% more in December than in the same months in 2021. It was the coldest winter in Denver in more than 20 years.
Some customers also started paying for Winter Storm Uri in February 2021, the week-long deep freeze, whose utilities had insufficiently hedged their contracts. They paid through the nose, and those costs are now being passed along to consumers.
This financial pain was evident this week at the statehouse when Gov. Jared Polis introduced several consumers. One woman said her family had commonly gone to the mountains on Saturdays, but could not now because her husband was working Saturdays to pay for the higher utility bills. Others talked of lowering thermostats but were still being shocked by their bills.
For Xcel, the high bills were being paid just as company officials informed shareholders that Colorado had delivered profits of 8.23% in 2022. That’s not exorbitant. Utilities commonly do as well or better. In the compact with states, they get monopolies, score high on reliability — and never take a loss. But this had produced calls for Xcel and other utilities to get more “skin in the game.”
Adding outrage was news that the PUC had allowed Xcel to pass along $2 million it had paid to lawyers and expert witnesses in supporting its argument for raised consumer rates. This equals the entire annual budget for the Office of Utility Consumer Advocate, a state agency of seven people charged with representing consumers in cases before the PUC. Passing along such costs has occurred for decades or longer. Despite precedent, it’s a valid question to ask whether an imbalance exists. Polis, in his remarks at the Capitol, seemed to agree.
In the short term, we can expect legislation that will require Xcel and other utilities to hedge in the natural gas markets. Think of this as being like insurance, with an up-front cost that prevents big, big bills.
The broad question is whether we should, as Polis suggested, shift energy use to renewables that in theory will not be vulnerable to global price swings. One bill got preliminary nod by a House committee this week would require home warranty service contracts to allow homeowners to replace gas-fueled devices with those powered by electricity.
There has also been pushback to this drive to electrification that one legislator from southeastern Colorado dismissed as consisting of “rainbows and unicorns.” That remark came during a discussion of a bill that proposed to prevent local jurisdictions from banning combustion of fossil fuels. Colorado has a sole precedent for such bans. Crested Butte last summer passed a law preventing use of natural gas in the remaining 100-some lots in that town to be developed.
Allen Best writes about Colorado’s energy and water transitions at the reader-supported e-journal Big Pivots. See more at BigPivots.com.