Xcel Energy is seeking a $157 million increase in electricity rates, but the company has been making so much money that state regulators and consumer advocates say it’s time for a rate cut, not a hike.
In the past three years, Xcel has earned at least $74 million more than its authorized return, according to a Colorado Public Utilities Commission staff analysis.
About two-thirds of the money has to its 1.3 million customers, according to a PUC staff filing in the rate case.
The PUC staff is recommending a $57 million reduction in rates.
The Colorado Office of Consumer Counsel, which represents residential and small-business customers, also is calling for a rate cut.
“The company’s revenue proposal is excessive,” said Cindy Schonhaut, director of the consumer counsel’s office. “The numbers don’t merit the increase.”
Schonhaut’s office is asking for a $69 million rate cut.
Under Xcel’s proposal, the average residential bill would rise about 5.3 percent, or $3.96 a month.
The consumer counsel proposal would cut the average residential bill $1.58 a month, about 2.1 percent.
“We knew this was going to be a challenge,” said Alice Jackson, vice president for rates and regulatory affairs at Xcel’s Colorado subsidiary.
The utilities commission has scheduled hearings on the rate-increase request for January.
Much of the proposed increase is to finance parts of .
The act aimed to cut Front Range air pollution by offering Xcel incentives to replace old coal-fired power plants with cleaner natural gas turbines.
The cost of the program was estimated at $1.3 billion.
The plan involved shutting six coal-fired units in Denver, Boulder and Adams County and building a new gas-fired unit and a pipeline to serve it.
Xcel is projecting its coal-fired plants will drop to 37 percent of generating capacity in 2018 from 49 percent in 2013, according to a filing to the PUC.
Natural gas-fire generation will rise to 56 percent from 39.6 percent during the same period.
“This investment will allow for Colorado customers to enjoy increased air quality and reduced emissions,” Xcel’s Jackson said in PUC testimony.
The consumer counsel is supporting recovery of $101 million in Clean Air Clean Jobs Act expenses — not in rates, but a separate charge on the bill.
“Xcel should be able to recover those costs, but keeping it separate makes it more transparent,” Schonhaut said.
The big debate is over what rate of return on equity, or ROE, Xcel should be permitted to recover.
The ROE is not a profit margin but a return on all assets. For example, Microsoft’s return is 24 percent and Walmart’s is 21 percent.
Xcel is seeking a 10.35 percent ROE, which would give the company a 7.7 overall return, “the lowest in two decades,” according to Jackson’s testimony.
Still, the consumer counsel and the PUC staff are recommending an ROE of about 9.1 percent.
In its 2012 rate increase, Xcel got a 10 percent ROE. The company consistently exceeded that cap, according to a filing by Charles Hernandez, a PUC financial analyst.
“That is a lot of return for company that doesn’t have any risk, that gets a guaranteed return,” the consumer counsel’s Schonhaut said.
Xcel, however, is looking at costs that have been deferred from an earlier rate case, including a growing property tax bill, Xcel’s Jackson said.
The original tax bill was estimated at $67.7 million and is now — because of additional property and increased assessments — $123 million, Jackson said.
“That eats up the cash-rich position,” she said.
A high ROE also reduces the company’s cost on bonds and loans. “That also saves our customers money,” Jackson said.
Still, Walmart, a major commercial customer with 100 retail operations and 25,600 employees in Colorado, challenged the proposed ROE in a PUC filing.
Citing an SNL Energy study, Steve Chriss, Walmart’s senior manager for energy analysis, said the utility industry average ROE is about 9.9 percent
The return that Xcel seeks is “counter to the broad industry trends,” Chriss said.
Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe
Hearing thursday
At issue: Colorado Public Utilities Commission public hearing on Xcel Energy’s electricity rate increase
Time: 5 to 7 p.m.
Site: Commission headquarters, 1560 Broadway, Suite 250
