The parent company of Xcel Energy Colorado announced a $45 billion capital investment plan for the next five years, with approximately $22 billion earmarked for Colorado.

Xcel Energy said it anticipates a substantial increase in energy demands caused by both trends in electrification and demand for large computer data centers for artificial intelligence.

Bob Frenzel, the head of Xcel Energy, said that this is the company’s largest capital plan to date. The plan responds to steadily increasing energy demands from new technologies, U.S.-based manufacturing growth, and the electrification of daily life, including EV recharging needs.

Frenzel noted that the entire energy industry is undergoing its most significant transition in a century, necessitating a fundamental shift in energy generation and delivery to meet these evolving needs.

“We are seeing unprecedented customer demand driven by all the ways we use electricity, from smarter homes and businesses to transportation and advanced technologies. This demand will only continue to grow,” Frenzel said said in an open letter to customers. 

“At the same time, we face a significant and growing risk of extreme weather events and other threats to the reliability and safety of our electrical system. And finally, we continue to help our communities transition to the clean energy future that will benefit them — and the environment — for years to come,” he said.

The rising popularity of AI and other data-heavy applications has created unprecedented energy needs for data centers, which require extensive electricity and cooling resources, according to Xcel.

Xcel Energy-Colorado’s third-quarter earnings report projects that the state’s peak energy needs may double within the next five years, creating a need of 5,000 megawatts to 14,000 megawatts due to growing electrification.

The Colorado Public Utilities Commission is reviewing Xcel’s plans, which include increased renewable energy projects and improvements and expansion of high-voltage infrastructure — including the $1.7 billion Power Pathway project currently under construction in eastern Colorado. Additional projected expansions and improvements could cost on the order of $2 billion.

Xcel projects 8,900 megawatts of potential data center developments by 2029, citing Colorado’s commitment to non-fossil energy, its skilled workforce, and proximity to major transit hubs.

Xcel said the five-year strategy will require rate adjustments of roughly 2% to 2.5% each year for customers in Colorado.

The utility has successfully obtained nearly $500 million in grants for “green” energy projects and is pursuing another $300 million in support from the Department of Energy.

With previous rate increases drawing scrutiny from the Colorado Office of the Utility Consumer Advocate before the PUC, Xcel said that Colorado residents’ rates, on average, have remained lower than those in many other regions. From 2014 to 2023, the company’s Q3 earnings report said the average residential electrical bill, as a percentage of household income, has decreased by 13%, from 1.59% to 1.38%.

In April 2022, the Colorado Public Utilities Commission approved a $182 million rate increase for electricity, adding about $5.24 per month to the average residential bill.

In September 2023, a $96 million rate increase was approved, adding another $4 per month for the average residential customer.

Natural gas rates fluctuate quarterly, but in November 2023, about $2.09 was added to the average residential gas bill.

In January, Xcel proposed a $171 million natural gas rate increase that, if approved by the PUC, would raise rates by about 9.5%, or $5.94 over the current rates, according to a report by Colorado Public Radio.