After paying steep winter-heating costs, Xcel Energy’s 1.3 million Colorado customers now face the prospect of bigger electric bills. Xcel Energy has a right to earn a profit, but some of what it wants the Colorado Public Utilities Commission to approve may not be in consumers’ best interests.
About 80 percent of heating and electrical bills covers fuel costs, and this year natural gas prices rose sharply. Last year, the PUC also OK’d a modest increase (73 cents a month for most households) to pay for pipelines and other natural gas infrastructure.
But it’s been four years since Xcel got a hike in its electric base rate, which pays for operating costs, transmission lines and other infrastructure, and also generates some profit. Meanwhile, Xcel has invested $1 billion upgrading electric service and expects to plow billions more into future improvements. Understandably, Xcel wants to recoup its expenses.
The company has asked the PUC to approve a $210 million a year increase in electric base rates; for residential customers, the hike would average 6 percent a month. If approved, consumers’ bills could go up next January.
However, Xcel’s request raises several questions. One involves a proposed 1.5 percent fee for consumers who don’t pay their bills on time – Xcel says last year it ate $25 million in bills that were never made good. But many consumers had difficulty paying because natural gas prices were so high. Is it practical to slap extra costs on customers who already have problems paying?
The company also wants to change an accounting method (depreciation) to recoup the costs of transmission lines and other facilities faster than it does now. Xcel says the change would better match depreciation with the useful life of equipment. Such a shift can improve a company’s bottom line and make its stock more attractive. But it would raise customers’ bills because new equipment would have to be paid off more quickly. Xcel’s credit rating is just above junk bond status, which irritates investors.
Xcel’s 2005 Colorado operations earned a return on equity (a measure of profitability) of 8.5 percent. That’s noticeably lower than the 10.75 percent the PUC allows the utility to make. Yet Xcel wants the PUC to let it earn up to 11 percent return on equity. The PUC should ask why the utility wants to raise the cap when it can’t reach the existing one.
The PUC meets May 23 to begin setting the timetable for letting the public intervene in the case – and already four consumer groups have signaled opposition to the package. The PUC likely will gather information during the summer and hold public hearings in September. A formal decision is expected by December.
Xcel’s stated aim, to have enough cash to improve service, is legitimate. But it’s up to the PUC to make sure any price hikes truly are in consumers’ interests.
