Coloradans face sharp spike in energy bills this winter

Millions of Coloradans face steep increases in energy bills this winter, with some having to pay as much as 50% more compared to last winter.

The rate increases occur at a time when residents struggle to keep up with inflation and the COVID-19 pandemic continues to hammer the state and the rest of the country.

And while the sharp rise in natural gas prices is primarily fueling the rate hike, actions by state regulators and policymakers are also driving energy bills up.

In the case of the state’s biggest utility provider, Xcel Energy, the spike also emanates from a rate hike approved by the Colorado Public Utilities Commission and, to a lesser extent, a law mandating utilities to charge customers more to help finance an energy assistance program for low-income residents. State officials said that small cost to consumers translates to big help for the state’s most economically vulnerable residents.

Filings with Colorado’s regulatory body show that an average energy consumer in an Xcel territory – the utility serves 1.4 million Coloradans – will pay an additional $132.86 over a five-month period beginning in November this year and ending in March of next year.

The biggest jump occurs this December, when that same consumer will shell out $39.57 more, paying a total of $119.96, a 49.2% jump compared to the same month last year.

The Polis administration called the cost increases “outrageous” and acknowledged Coloradans’ vulnerability to wild fluctuations in energy prices.

“These cost increases are outrageous and show how vulnerable we are to huge price swings in natural gas prices. We saw it during the Texas storm last winter and we are seeing it again this winter,” gubernatorial spokesperson Victoria Graham told Colorado Politics. “It’s why we need to move quickly to get to low-cost solar and wind energy, which have more stable low prices.”

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The Public Utilities Commission, which regulates the state's investor-owned utilities, anticipated rising energy bills after gas prices soared globally this year and asked the utilities in November about their plans to pass on the expenses to consumers.

“The PUC has voiced its concerns over natural gas commodity pricing in recent weekly meetings and has gathered enough information from utilities to better understand the impacts to consumers that are likely to be seen this heating season,” the commission said in a statement.

The commission said it plans to tackle the soaring energy bills by potentially expanding hedging efforts by utilities, spreading efforts to recover unplanned costs from ratepayers over a longer period and boosting low-income support programs.

What the PUC can’t control, a spokesperson acknowledged, are the fluctuations in energy prices.

“Consumers' utility bills are subject to the volatility of gas commodity prices,” PUC spokesperson James Cullen told Colorado Politics. “This is unfortunately not something the PUC or any of our utilities have much control over.”

Colorado is not alone in facing higher costs for gas and electricity.

In eastern Europe, both Serbia and Kosovo are implementing rolling blackouts as natural gas and power prices are skyrocketing, according to Kosovo's Prime Minister Albin Kurti, who said prices are up to seven times higher than last year.

Great Britain has seen a spike in natural gas to $25 per million British thermal units (BTUs), about five times last year’s price. After shutting down many of its own coal-burning power plants, the government there has been buying power at a significant premium from private producers that still have operational coal plants, according to Rajiv Gogna of Lane Clark & Peacock Energy Analytics in the UK.

Part of the problem is that the UK went through an unexpected period of low winds that prevented the country’s windmills from contributing much to the demand.

During the February 2021 Valentine's Day freeze, in Texas windmills stopped turning, solar panel production was reduced by cloud cover and natural gas lines froze up for four days, cutting off gas supplies to both power plants and homes, forcing that state to fire up coal-fired powered plants to maximum capacity. Even so, rolling blackouts became necessary during the cold snap.

Gogna said the UK’s energy crisis has “torn apart the (power) sector, driving multiple suppliers into non-existence and forcing millions of customers to change supplier... We have seen the perfect storm of low renewable generation and an increase in global demand for gas, which has put the UK’s limited capacity on the edge, forcing prices to repeatedly break new ground.”

France, too, is facing natural gas price hikes, as is most of Europe. Between July 2020 and October 2021, the average annual gas bill in France rose from $1,007 to $1,586.

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Like Xcel Energy, Black Hills Corporation, which serves roughly 300,000 Coloradans, attributes the hike in energy bills to soaring natural gas prices.

The second cause, the utility said, stems from expenses stemming from its proposed plan to recover expenses incurred when four days of extremely cold weather hammered states throughout the Midwest, including Colorado, in February.

At the time, natural gas providers, facing increased and unplanned demand, hiked prices nearly 10 times.

The U.S. Energy Information Administration reported that gas selling for $2.88 per million BTUs on Feb. 1 soared to $23.86 per million BTUs on Feb. 17 before dropping back to $2.80 a week later, costing Xcel Energy more than $1 billion throughout its nationwide system.

In response, Colorado’s utilities asked their regulators to allow them to recoup expenses during this extraordinary weather period.

The commission already approved the requests of Atmos Energy Corporation, which asked to recoup $23.5 million from its customers, Colorado Natural Gas, which sought to recover $7 million, and Public Service Steam, which requested nearly $2 million.

Still pending are requests from Black Hills Gas and Black Hills Electric, although the major parties to the proceedings, including the PUC staff, already agreed in principle to allow the company's electric arm to recoup roughly $22 million in expenses. The PUC staff urged commissioners to approve Black Hill’s request, arguing it is reasonable. The company's gas arm, meanwhile, is seeking to recover $72.7 million.

If Colorado's energy regulators also approve Xcel’s requests – $263 million for gas and $287 million for electric – ratepayers are on the hook for a total of $677 million.

The planned rate hikes this winter unevenly hit communities.

Ratepayers in Black Hills' central region covering Castle Rock south to Monument, Fountain, Woodland Park, east to Kiowa, Limon and Burlington, as well as surrounding communities would see their bills in March hike from $54.24 to $92.99, a 71.4% increase.

For its irrigation or seasonal customers, the price hike rises to 86.7%.

Statewide, the average residential Black Hills customer would pay $37.93 more in March compared to the same time last year – an increase of more than 50%.

To prepare customers for the sharp increase in bills, the utilities told commissioners they have launched messaging campaigns to alert ratepayers about the looming increases in their energy bills.

Black Hills said it rolled out a campaign to share conservation messages and bill assistance resources throughout the winter season.

Atmos Energy, which is also hiking its energy rates by 34% in March - $17.96 more for its average residential customer - said it is reaching out to its roughly 114,000 ratepayers with the message to conserve energy.

The company told commissioners efforts to disseminate information about its low-income program programs occur throughout the year. In December, the company added, it will include information about a nonprofit organization that helps low-income residents on customers’ bills, and in the succeeding three months, it will also print information on how they can access energy assistance.

Colorado Natural Gas, whose customers will end up paying between $21.96 and $40.23 more this March, depending on where they live, also urges conservation. On its website, the company lists programs for anyone struggling to keep up with energy bills.

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While soaring natural gas prices are largely to blame, decisions by Colorado’s policymakers also contributed to the significant increase in energy bills.

A small part of the increase in energy bills resulted from a new law requiring investor-owned utilities to collect a charge - starting with $0.50 this October, ramping up to $0.75 in October 2022 and then annually adjusted for inflation a year after - from energy customers. The new revenue stream will help finance low-income energy assistance programs.

For Xcel, that means $2.50 added to ratepayer’s bills from last November through March 2022.

The General Assembly’s analysts estimated the new law will generate $6.6 million this fiscal year, $12 million in the next year and $14.5 million in succeeding years.

Xcel said it expects to collect $8 million annually from the charge, which will go to Energy Outreach Colorado, the Colorado Energy Office and the Department of Human Services.

That amount, Xcel said, would help those most in need.

The other big source of the rate increase facing Xcel customers emanates from the decision by Colorado’s energy regulators to approve the company’s 2020 gas rate hike application.

That rate hike added $34.12 over five months this winter.

Xcel noted nobody opposed its rate hike application.

The company also said that the effect of that rate hike on customers would have been smaller this winter, but it did not start collecting the money right away. The parties had agreed to delay the collection until April 2021 — after the heating season — because of the economic effects of COVID-19.

That, in turn, artificially lowered bills from January to March. The company plans to collect some of that deferred revenue this coming March.

All told, Xcel customers will see their energy bills increase by an average 37.3 % from November 2021 to March 2022. The biggest price increase – a nearly $40 hike in the monthly bill – occurs this month. That dips to $35.18 in January, eases off to $18.10 in February and settles at $22.49 in March, when customers will have to pay a total of $86.50 compared to $64.01 during the same month last year.

In its filing, the company noted that it excluded in its latest analysis Storm Uri-incurred expenses that would been passed on to consumers. Those expenses would have added a 9.7 percent increase to average residential bills, the company said.

While the company asked the commission to allow it to recover those expenses, it won’t apply this winter.

That delay, along with assumptions that natural gas prices will decrease in the coming months, means its average customers won’t have to face a 71.56% hike – the company’s original estimate – in energy bills this coming March.

The company told commissioners it shares their concern about the effect of spiking natural gas costs on customers.

“However, we have a strong track record of keeping our customer’s bills as low as possible,” the company’s lawyer wrote, noting an American Gas Association’s survey that said the utility had the third lowest rates out of 50 major gas utilities in 2020 and more than 34% below the national average. "While rising natural gas commodity costs are indeed a concern our customers will benefit from a baseline that is among the lowest in the country.”

The Polis administration also noted the results of the American Gas Association survey.

Still, the planned rate increases by utilities in Colorado are higher than the average increase in utility bills tracked by U.S. Energy Information Administration for American households that primarily use gas for heating. The federal agency said the energy bill of the average gas-fueled American home will pay 30% more between October 2021 and March 2022.

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The price of natural gas doubled this fall, which many attributed to a spike in demand as economies recover from the pandemic, as well as extreme weather.

The problem, noted American Petroleum Institute’s Mark Green last month, is that global supply didn’t match global demand. In fact, he wrote, gas supply had been largely flat.

And while demand climbed, Europe and Asia experienced a colder winter and a warmer summer, increasing demand while leaving gas storage at multi-year lows, he said.

Green also noted that gas production in America largely remained flat when, typically, higher prices would have spurred more production or less demand in the country’s power sector.

Producers, he said, “grappled with the workforce and supply-chain limitations that have impacted so many industries and paid down debt.”

Some have pointed to policies that seek to shift the country’s reliance on coal to alternative forms of energy, but Green said drawing that immediate connection is difficult.

“There are definitely some regions of the country – the Northeast, for example – which routinely have faced higher natural gas prices due to state-level policy restrictions on building much-needed gas infrastructure,” he said. “Still, the overall situation is a good reminder of the importance of remaining energy independent as opposed to relying on imports. It wasn’t that long ago that the U.S. was projected to be the world’s largest gas importer, but that’s changed dramatically over the past decade thanks to the shale revolution.”

America today, Green noted, is now among the world’s largest gas exporters.

Colorado played a key role in that development.

The state is America’s seventh largest producer of natural gas – thanks to its vast natural gas reserves, which account for 5% of the country’s total.

Eleven of the country’s 100 largest natural gas fields are found in the state.

Its fertile fields have allowed Colorado to double the output of its marketed natural gas since 2000.

The state has been moving away from coal since.

In 2004, Colorado became the first state in the country to require, via the ballot box, a renewable energy portfolio standard for power producers.

The legislature increased the requirements a few more times, culminating in standards mandating investor-owned utilities derive 30% of electricity they sell from renewable energy sources by 2020.

Polis doubled down on that approach, noting he ran on a platform of transitioning to 100% renewable energy by 2040.

“Looking forward, we know that clean energy will be critical to helping us build a more sustainable and just economy as we begin to recover from this pandemic,” the governor said in the Colorado Greenhouse Gas Reduction Roadmap, his strategy for achieving the General Assembly’s goals of reducing 2005-level greenhouse gas emissions by 26% by 2025, 50% by 2030 and 90% by 2050.

Already, the administration said, electric utilities have committed to reducing their greenhouse gas emissions by 80% by 2030.

A key plank of that strategy, his administration said, is the “swift transition away from coal to renewable electricity.”

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Some 11 months after Polis unveiled his strategy, Xcel Energy struck a deal to accelerate the closure of the state’s largest coal-fired power plant, the Comanche Three unit in Pueblo, by five years, a move that could allow the utility company to reduce its greenhouse gas emissions by about 90% by 2030.

Supporters of renewable energy see the move as a step in the right direction.

Sen. Chris Hansen, a Democrat who represents District 31, said the fluctuations in natural gas prices reinforce the need to transition away from fossil fuel generation to renewable energy.

“One of the big economic upsides of doing more wind and solar is you eliminate commodity price risks,” he told Colorado Politics, noting that’s the approach Colorado adopted. “It reduces the risk for power customers.”

Hansen, who has decades of experience in the global energy industry, acknowledged the short-term tradeoffs between coal and natural gas. As Colorado shuts down its coal plants, there will be some years when the state would need to use more natural gas, he said.

“But the long-term future of Colorado is very much of that wind of and solar,” he said.

Hansen said wind and solar energy have become "highly forecastable,” which means reliability, since power producers can plan their generation around the forecast.

Rep. Matt Gray, a Democrat who represents District 33, said wind and solar energy is more predictable, and therefore better for customers, precisely because it’s produced locally.

Energy from wind and solar, he said, is inoculated from what’s happening elsewhere in the world.

"You’re not dependent on what’s going on in a foreign country,” he said. “The generation occurs in Colorado. We’re not as vulnerable to [fluctuations] in oil and natural gas.”

Like Hansen, Gray noted the complexities of the transition away from fossil-fired power. Society, he said, must grapple with how to help coal plant workers when coal plants are decommissioned, as well as find ways to ease the transition for families that might be looking at spikes in their monthly bills.

There’s a lot of politics – and balancing act, he said.

“We can recognize climate and emissions are a threat to public health. We realize that the folks who work in the fossil fuel industry for years deserve to be treated with respect and their families taken care of,” he said. “It's a hard problem because infrastructure development moves slowly, and it needs to get paid for and it’s expensive and people’s bills come monthly.”

What policymakers can do, Gray said, is holistically look at the family budget, and figure out ways to offer relief.

“The state cannot control oil and natural gas prices,” he said. “But there are things that we can do with the cost of housing.”

Sen. Ray Scott, a Republican who represents District 7, is unpersuaded by the Democrats' arguments.

What's happening, he said, is a simple equation of supply and demand. The problem, he argued, is that Colorado has adopted a policy of effectively limiting its portfolio of energy sources.

"They only want wind and solar, and that’s the cliff we are going to drive right off of," he said. "As you squeeze the resources to be used in those facilities, the cost of energy is going to go up if you cannot produce more natural gas right now."

He added: "The bottom line is it's not helping the consumer."

In a statement, the Polis administration hinted of strategies to help Coloradans during the crunch.

Victoria Graham, the governor’s deputy press secretary, said saving Coloradans money is “the top priority” for the governor, particularly amidst rising prices in housing, food, and other essential goods.

“Natural gas prices mean that Colorado will have to do even more to hold families harmless, and the TABOR refund, which is an estimated average of $72 per person, which they will get once 2021 tax returns are filed, is a good start,” Graham said.

Reporter Mary Shinn contributed in this report.