Xcel Energy’s proposed $210 million- a-year electric-rate increase is likely the first in a series of hikes Colorado customers will see in the coming years.
“As soon as we finish this rate case, what I think will happen is the company will file another one,” said attorney Mark Davidson. “Instead of every four years, we’re probably in a two-year rate-making cycle.”
Davidson, who represents Xcel’s two biggest industrial customers, Rocky Mountain Steel Mills and the Climax molybdenum mine, said one of the biggest drivers of the rate hikes will be Xcel’s desire to begin cost recovery on its investment in the $1.3 billion Comanche 3 coal-fired power plant, which is under construction near Pueblo.
Xcel agrees that will happen but doesn’t know exactly when or what the customer costs will be.
The company filed its electric- rate case April 14, and the Public Utilities Commission will take testimony and hold hearings before ruling on it. The rate hike is different from increases customers see on their bills periodically so Xcel can recover what it spends on fuel to generate power.
The proposal would increase monthly electric bills for the average residential customer by 18 percent beginning in January, from $53.23 a month to $62.67. For the typical small-business customer, the plan calls for a 17 percent increase from $85.17 a month to $99.94, according to Xcel.
Fred Stoffel, Xcel’s vice president for policy development, said the rate increase is designed to recover about $1 billion the utility has spent on its electric system since 2002.
The rate hike includes $24 million Xcel has spent on financing costs for the Comanche plant. Stoffel said he expects Xcel to file another rate case during construction to recover financing costs, but he didn’t say when or how much it would be for.
“It depends on how much money we’ve invested in the plant at that point and how much we have outstanding in financing,” he said.
Stoffel said a final rate case will be filed before the 750-megawatt plant’s opening so that Xcel can collect on its full $1 billion investment when the plant starts producing power at the end of 2009. Xcel will own 500 megawatts, and other partners will own the other 250 megawatts.
Xcel’s last electric-rate case was filed in 2002 and resulted in a slight reduction in what are called electric base rates. Base rates recover a company’s investment in its system and provide an authorized rate of return. Right now, base rates provide for a 10.75 percent authorized rate of return, and Xcel wants to boost that to 11 percent as part of its rate case.
The utility had an 8.5 percent return last year.
“We had lower earnings in 2005 because our costs went up, our investments went up and our sales were down,” said Stoffel.
The electric-base-rate filing in April is separate from costs Xcel passes through to its customers several times a year.
Those costs are for fuels such as natural gas and coal that Xcel uses to generate power, and for the price Xcel pays to buy power from independent power providers.
Those pass-through costs have come in machine-gun-like fashion during the past five years, mostly because of the volatility of natural-gas prices.
“Base rates haven’t gone up for 12 years, but there have been changes to bills,” said PUC spokesman Terry Bote. “A lot of the costs have had to do with the purchased power and fuel, at least recently.”
Utility analyst Ron Binz said Xcel’s construction of the Comanche plant is indicative of a trend away from investor- owned utilities buying power from independent power providers.
Xcel also wants to get PUC approval to build an experimental coal-gasification power plant that would cost as much as $1 billion and generate 350 megawatts of power.
“There is more profit from building than buying. They earn a rate of return on their investment,” said Binz, former director of the state Office of Consumer Counsel, which represents ratepayers in utility cases.
Jim Greenwood, current director of the OCC, said his office is in a “very preliminary” stage of review of the electric-rate filing.
“We are really working hard to get the best deal we can,” he said.
Bote said a schedule for when testimony must be filed and when hearings will be held will be set by the PUC on May 23.
Staff writer Steve McMillan can be reached at 303-820-1695 or smcmillan@denverpost.com.
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