Colorado Lawmakers Introduce Bill To Address Utility Costs, Future Of Natural Gas

By Chase Woodruff, Colorado Newsline

April 19, 2023

After weeks of testimony from utility executives, consumer advocates and energy experts, Democratic state lawmakers this week unveiled a broad package of reforms that they say will help protect Coloradans from future spikes in their natural gas and electricity bills.

Led by Senate President Steve Fenberg, a Democrat from Boulder, lawmakers on Tuesday introduced Senate Bill 23-291, which would enact a range of new regulations on privately-owned electric and gas utilities that operate in Colorado.

The legislation addresses many of the issues raised by Democrats on the Joint Select Committee on Rising Utility Rates, convened by Fenberg earlier this year following sharp increases in many Coloradans’ monthly utility bills in 2022 — even as utilities like Xcel Energy reported record profits.

“I am proud to introduce this legislation that will improve transparency and hold utilities more accountable to the ratepayers they serve,” Fenberg said in a statement. “Senate Bill 291 will help to align utility companies’ and Coloradans’ interests and expectations about their energy service, while helping save Coloradans money on their energy bills.”

Sharp increases in natural gas prices were largely to blame for last year’s rate hikes, which caused utility bills for the average Xcel customer to rise from an average of $115 in December 2021 to $177 a year later. With natural gas prices falling, rates have since declined again.

Xcel, which serves 1.5 million Colorado ratepayers, and Black Hills Energy, which serves 300,000 customers in the Pueblo area and other parts of the state, are Colorado’s only two investor-owned utilities and together account for about 60% of the state’s electricity sales. Unlike the municipally-owned utilities or rural cooperatives that make up the other 40%, investor-owned utilities are for-profit businesses that aim to deliver returns for their shareholders.

"With less than 30 years to get off fossil fuels and avoid the worst climate impacts, our investments need to change accordingly."

– Alana Miller, of the Natural Resources Defense Council

In turn, these “regulated monopolies” are subject to scrutiny from the state’s three-member Public Utilities Commission. SB-291 would direct the PUC to more closely regulate the utilities’ efforts to protect ratepayers from volatility in the price of natural gas or other commodities, including by requiring companies to file “gas price risk management plans” before the end of this year.

It would also require the PUC to adopt rules to ensure that utilities have financial incentives to keep fuel costs down. In a media availability Wednesday, Fenberg said that requiring for-profit utilities to “have skin in the game,” either by bearing a small percentage of total fuel costs or another risk-management mechanism, would lead to better planning and purchasing decisions by utilities to mitigate price shocks.

“Right now, they repeatedly will tell you they pass off 100% of those costs to consumers — they don’t make a profit,” Fenberg said. “That’s true, but the opposite is true, which is if they don’t make a profit and they pass off the cost completely, that means they have no incentive to actually contain costs.”

In an interview, Robert Kenney, president of Xcel Energy’s Colorado division, called the legislation “fatally flawed” and said it wouldn’t achieve the select committee’s stated goals of bringing down costs and reducing volatility. The most effective ways to do that, he argued, would be to allow utilities to expand natural gas storage capacity and enter into longer-term purchasing contracts that could provide more cost certainty.

“We already have an incentive to do right by our customers,” Kenney said. “There’s no incentive for us to do anything other than purchase at the least cost.”

Divide over the future of gas

SB-291 and the three select committee hearings that preceded it have brought into focus a stark divide over the future of natural gas infrastructure in Colorado.

"Roughly two-thirds of homes and businesses in the Centennial State use natural gas as their primary heating and cooking fuel," according to federal data, "accounting for about 15% of statewide greenhouse gas emissions."

The climate impacts of natural gas, along with concerns over the health risks of indoor air pollution and smog linked to fossil fuel development, have made all-electric building codes and incentives to replace gas-powered appliances with electric alternatives a top target of climate advocates and progressive policymakers. Advocates say the volatility of global commodity markets, subject to unpredictable pressures like the war in Ukraine, is yet another reason to ditch gas for good.

“We all experienced a massive spike in our utility bills this winter because we’re too reliant on gas,” Danny Katz, executive director of the Colorado Public Interest Research Group, said in a statement on the bill. “Gas is volatile, expensive and dangerous for our health. Our utilities are not doing enough to reduce our reliance on gas.”

The bill contains a range of measures aimed at assessing the long-term future of natural gas in Colorado, including directing the Colorado Energy Office to study the risks posed by “stranded or underutilized natural gas infrastructure” as more homes and businesses go all-electric. It would also bar utilities from offering incentives to customers for new natural gas hookups, and from charging penalties or fees to customers who terminate gas service.

In hearings last month, utility executives argued to lawmakers that investments made today in natural gas infrastructure could one day be used to distribute cleaner fuels like hydrogen or renewable natural gas. Kenney said Wednesday that the debate over natural gas — which is being hashed out in PUC proceedings like mandatory “clean heat plans” — is beyond the scope of the select committee’s stated purpose.

“That’s a fine policy discussion to have,” said Kenney. “That doesn’t have anything to do with helping customers today be insulated from fluctuations in natural gas commodity costs, which is why this committee was created.”

But environmental groups, who warn of the potential for a “feedback loop” of higher gas infrastructure costs and customer disconnections in the coming years, say the time to have that discussion is now.

“With less than 30 years to get off fossil fuels and avoid the worst climate impacts, our investments need to change accordingly,” Alana Miller, Colorado policy director for the Natural Resources Defense Council, said in a statement. “This bill is a critical step in winding down gas system investments, bringing us closer to a future of cleaner air, healthier homes, and lower bills.”

Sara Wilson contributed to this report.

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