After a record spike in energy costs over the winter, Colorado Democrats have introduced a sprawling new bill they say will help protect ratepayers from future price shocks.
The proposal follows an uproar over Colorado’s investor-owned gas and electricity companies. While many residents saw their heating bills double or triple last winter, the state’s largest utilities – including Xcel Energy, Black Hills Energy and Atmos Energy – earned healthy profits for their shareholders in 2022.
In response, lawmakers formed a joint select committee to investigate the forces behind the soaring energy bills. The new legislation is the result of three hearings in which the bipartisan panel heard testimony from consumer advocates, environmental groups and utility executives.
While both Democrats and Republicans sat on the committee, only Democrats have sponsored the resulting legislation.
Here’s more detail on what’s in the 19-page bill:
- By Nov. 1, investor-owned utilities must file plans to manage spikes in natural gas commodity prices including a monthly cap on fuel charges.
- By 2025, the Colorado Public Utilities Commission must approve new rules to ensure companies have a financial incentive to protect customers from high natural gas prices
- Regulators must eliminate a subsidy that charges ratepayers for the cost of adding new natural gas customers
- Regulators must eliminate penalties for customers who choose to disconnect from the gas system
- The law would explicitly bar utilities from passing any costs related to lobbying, attorney’s fees, tax penalties, political contributors or brand promotion onto their ratepayers.
- The Colorado Energy Office must commission a study on the risk of companies saddling ratepayers with the cost of abandoned or underutilized natural gas assets.
The bill proposes two main strategies to address the problem: a suite of regulations to guard customers against volatile natural gas prices and new limits on when utilities can charge ratepayers for expenses related to lobbying, ballot campaigns or promotional advertising. It would task the Colorado Public Utilities Commission with making sure utilities abide by the legislation, which means ratepayers might not see any benefits for years.
Nevertheless, state Sen. Steve Fenberg, a Boulder Democrat who led the investigative committee, said the changes would help protect ratepayers in the long term and give utilities a new reason to work harder to avoid high energy costs.
“The real magic is aligning the incentives better,” Fenberg said. “This is really about managing the companies to get them to care about costs, so then they’re better about containing them.”
Robert Kenney, president of Xcel Energy Colorado, told CPR News the proposed legislation doesn’t include meaningful proposals to help address sudden spikes in gas prices. Instead, he said it appears to align with the priorities of environmental groups, which have pushed for the utility to end investments in natural gas.
“There is little in here that will limit gas volatility or produce any yields for customers,” Kenney said.
Kenney said he would prefer a focus on market-driven strategies to blunt the sting of high natural gas costs. That could include policies to encourage utilities to enter into long-term contracts to buy fuel or build new gas storage systems, which could hedge against price spikes.
Those positions align with the company’s long history of defending its natural gas business, which serves 1.5 million customers in Colorado.
While Xcel Energy has led the nation in efforts to build wind and solar, it’s also fought local and state policies to limit the growth of new fossil fuel infrastructure. In 2021, it helped form Coloradans For Energy Access, a coalition dedicated to opposing the movement to shift buildings from natural gas to electricity. A political contribution report shows it donated $80,000 to the group last year. The company has also fought efforts to eliminate ratepayer-funded subsidies for its natural gas business.
Kenney was also frustrated with the provisions to ban the company from charging customers for corporate advocacy, arguing Xcel Energy already doesn’t charge ratepayers for any costs related to lobbying fees or advertising.
“It’s a solution in search of a problem,” he said.
Meanwhile, environmental advocates showered praise on the new legislation – especially for its focus on natural gas.
Since the spike in energy prices this winter, many climate groups have pointed out that the downsides of natural gas go beyond its role in helping warm the planet. A state analysis also shows higher fuel costs, partly related to the war in Ukraine, were the main factor behind the rise in utility bills.
“It’s high time for utilities to stop using Colorado ratepayers to subsidize expensive fossil fuel infrastructure that brings pollution into our homes and into our communities,” said Meera Fickling, senior climate policy analyst at Western Resource Advocates, a climate advocacy group.
Other groups say the limits on corporate advocacy are essential to restraining the influence of companies like Xcel. A recent political contributions report showed the company spent $3.1 million on lobbying last year, including $484,000 in Colorado.
While the company might not charge customers for direct lobbying expenses, the Energy and Policy Institute, a utility watchdog group, has issued reports claiming many utilities do recover fees paid to trade associations like the American Gas Association. Those groups then spend ratepayer dollars to lobby on behalf of the company.
David Pomerantz, EPI’s executive director, said the new legislation would close those kinds of loopholes and put Colorado “at the front of the pack” when it comes to utility accountability.
“It could be strengthened by ensuring that investor-owned utilities are prohibited from charging ratepayers for all forms of lobbying, including to influence rules and regulations,” Pomerantz said.