The Colorado Supreme Court on Monday upheld the state utility commission’s authorized method of charging Black Hills Energy customers for $23 million in natural gas purchases for a winter storm, rejecting claims that the surcharge was unreasonable.

In advance of Winter Storm Uri in February 2021, Black Hills bought additional gas to ensure continued service to its customers. Afterward, the Public Utilities Commission signed off on a proposal for Black Hills to recover its costs by imposing a flat surcharge on its customers’ future energy use, spread out over two years.

One of Black Hills’ major customers, industrial materials producer Holcim, protested the plan. The company argued the fair method was to charge users based on the electricity they actually consumed during the storm. Under that methodology, Holcim asserted its true share of the gas purchase should be under $600,000, compared to roughly $2 million using the commission-approved plan.

However, the Supreme Court’s Jan. 13 opinion noted it must give substantial leeway to the commission’s decisions and ultimately determine whether they are “just and reasonable.” For a variety of reasons, Justice Richard L. Gabriel wrote that it was.

The surcharge “accurately reflects the cost of service because,” he explained, “the PUC concluded, with ample record support, that Black Hills had purchased natural gas based on total forecasted customer need, not based on actual individual consumption during Winter Storm Uri.”

“Moreover,” Gabriel continued, “it appears undisputed that Black Hills’s natural gas purchases enabled it to provide to its customers uninterrupted service at normal usage volumes throughout the weather event, which was the very purpose for Black Hills’s advance purchases.”

The key question raised by Holcim was whether Black Hills’ attempt to recover its pricey gas purchase in advance of the storm should be proportional to customers’ actual energy use or whether the cost could rightfully be imposed with a flat rate systemwide.

Holcim took no issue with Black Hills recovering its expense from customers over two years, which was intended to avoid “rate shock.” Instead, the company insisted the surcharge was unreasonable because it was untethered to customers’ actual electricity use during the winter storm.

According to Holcim’s calculations, the plan required it to pay 360% more than it should, with residential customers receiving a windfall.

After the Public Utilities Commission sided against Holcim, Denver District Court Judge Andrew J. Luxen upheld that decision, finding a surcharge imposed equally on all customers was not arbitrary.

On appeal to the Supreme Court, Holcim argued it was “frustrating” to see its position characterized as “some haphazard selfish endeavor.”

“How much electricity you use is directly relevant to what you pay towards that cost,” said attorney Mark T. Valentine during oral arguments. “In this case, there’s no correlation between what Holcim used” and its surcharge over the next two years.

In response, the Public Utilities Commission contended Black Hills’ purchase enabled customers to use their normal amount of energy during the inclement weather, should they have desired. Therefore, Holcim received the same benefit from Black Hills’ actions as everyone else.

The Supreme Court agreed with that logic. Gabriel noted there was no evidence to show Holcim told Black Hills in advance that it intended to use less electricity during the storm, which could have affected the amount of gas purchased.

“Instead, Black Hills proceeded based on its forecasts, and all Black Hills customers, including Holcim, were able to satisfy their normal electricity needs throughout the storm,” he wrote.

The case is Holcim U.S. Inc. v. Colorado Public Utilities Commission et al.