A decade ago, Xcel Energy’s corporate predecessors agreed to reliability benchmarks that require the utility to pay penalties to customers when it fails to provide electricity as promised.
Over the past six years, Xcel has paid out $39.3 million in service credits. But the agreement expires this year, and without a new pact, the utility won’t have to compensate its customers for power outages.
At first, Xcel tried to wiggle out of the penalty plan altogether. Now there is a compromise pending before the state Public Utilities Commission that would leave the basic structure in place but reduce the maximum penalties by 27 percent.
Given Xcel’s spotty service record – one of the weakest in the industry – we think it’s essential to keep a schedule of penalties.
In July, J.D. Power & Associates ranked Xcel last for customer satisfaction among 12 large Western utilities. The new penalty plan will reduce the company’s liability and with it the incentive to bolster its reliability.
Still, the provisions were forged with the input of government and consumer groups, and Xcel should be saluted for signing a new penalty agreement at all – it has no obligation to do so.
The new agreement would focus service credits on affected customers. For instance, a customer who suffered five outages in a year or a 24-hour stretch without power would get $50. The previous agreement spread penalty credits among all customers, whether they were affected or not, resulting in typical annual credits of $7 to $9. The concept seems reasonable, but the plan would also reduce Xcel’s overall liability – and that’s the figure that creates the incentive for Xcel to improve its reliability.
Currently, the utility could pay penalties of as much as $26.8 million. That would drop to $19.5 million. That’s a better deal for Xcel shareholders than its customers.
Xcel has been “investing substantially” in operations, putting more than $1 billion into its system since 2002. We can’t be sure that’s adequate, since Xcel’s 1.3 million Colorado customers continue to suffer unacceptable outages in electrical services. In July, about 12,000 Xcel customers suffered outages during a weekend heat wave. In February, 325,000 ratepayers lost power due to Xcel miscues during a patch of severe cold.
Protecting Colorado ratepayers in this instance falls to the PUC. A public hearing on the matter is set for Sept. 15. Commissioners should examine the proposal closely and protect consumers’ best interests.
