With energy bills where they are right now, it’s starting to feel like burning dollar bills for heat might be the cheaper option. But why are prices so high? There’s a short-term answer and a long-term one.

The short answer is the price of natural gas. Natural gas prices jumped to their highest point in 14 years last fall due to global supply disruptions brought on by the war in Ukraine, according to reporting by Colorado Public Radio. By law companies like Xcel can pass those cost increases directly through to consumers without generating additional profit.

The good news is those prices are coming down, as the U.S. increased its production and demand hasn’t been as high as feared, thanks to a warmer than expected winter in Europe. That will lead to as much as a 15% drop in energy bills in the next few months.

“Colorado customers will see lower natural gas bills than previously expected as a result of a recent decrease in wholesale natural gas prices,” Xcel Energy said in a statement.

So, the short-term spike is mostly due to a volatile market. According to a Public Utilities Commission (PUC) study, of the increase we are seeing, 70% is due to the price of natural gas and increased usage.

In response to this, Gov. Jared Polis directed the three-member PUC to reduce customer costs by exploring an expansion in natural gas storage and by making utilities pre-purchase gas ahead of anticipated price hikes, according to reporting by The Colorado Sun.

Having the ability to buy natural gas when the price is low and store it to use when the price is high makes a lot of sense. We urge the PUC to adopt those policies.

Critics of Xcel are decrying it taking record profits while so many Coloradans are struggling to pay their bills. This gets to the long-term issue.

It’s true that Xcel made a lot of money last year. The company reported it had earned $1.74 billion in profit last year – an 8.7% increase over the previous year. The problem is that Xcel doesn’t make more profit when gas prices go up.

The state grants the company a competition-free monopoly, which comes with strings attached. It isn’t allowed to turn a profit on any of its day-to-day operations. So, how does a for-profit business make a profit if it isn’t allowed to make one through operations?

By law it is allowed to collect extra revenue on infrastructure investments, like new transmission lines, power plants or wind farms. The Colorado Public Utilities Commission sets the rate of return through a process called “base rate increases,” which are extra fees baked into monthly energy bills.

“Xcel Energy’s base rates have doubled in the last 15 years,” Cindy Schonhaut, the director of the Colorado Office of the Utility Consumer Advocate, told CPR. “That’s astounding, and it doesn’t have to do anything with inflation. It has everything to do with greed and profit.”

That’s on the PUC, which can tell the energy companies it won’t approve a base rate increase for an unnecessary project, or not approve the full amount requested. The PUC has done this on occasion, but it’s also gone along with a number of increases.

We want our energy companies to invest in infrastructure. That’s good for Colorado, but the PUC needs to really scrutinize each project. The PUC can also tell these companies that the days of 10% profit are over. Maybe 3% profit is more appropriate. Customers are hurting, it’s time energy providers tighten their belts.

Grand Junction Daily Sentinel Editorial Board

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