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Will Xcel Energy customers have to pay for possible Marshall Fire damages?

It's not an easy yes or no question, and it depends on whether or not Xcel Energy is found liable for damages from Colorado's largest wildfire.

BOULDER, Colo. — With Xcel facing multiple lawsuits because of the Marshall Fire, many 9NEWS viewers have asked if Xcel customers will have to pay for the company’s legal defense and any possible legal settlement. 

"The most likely cause of the second fire was hot particles discharged from an Xcel Energy power line,” Boulder County Sheriff Curtis Johnson said on Thursday. 

The 17-month investigation found that the Dec. 30 Marshall Fire was two fires. One started on the property of Twelve Tribes just north of Highway 93 and Highway 170 from burning that happened on the property on Dec. 24. The wind on Dec. 30 reignited what was burned one week earlier. 

The investigation found that an unmoored power line caused hot aluminum particles to start a second fire just south of Highway 93 and Highway 170. 

This past legislative session, State Senate President Steve Fenberg, D-Boulder, sponsored a bill that, in part, limited what costs utility companies could pass on to customers. That bill, which was signed into law, prevents utility companies from passing on expenses related to hiring outside legal help to argue for higher electric or gas rates. 

The new law does not address hiring outside legal help to fight lawsuits related to events like the Marshall Fire. 

“This, specifically, is not addressed, but I think the spirit of that law easily could apply to this situation,” Fenberg said. “To me, this is pretty clearly in the category of something that ratepayers should not be on the hook for.” 

The new law also does not address utility companies trying to pass along costs related to a legal judgment or any damages determined in court. 

“I can’t decide or speak for the Public Utilities Commission, but as a legislator and someone who works on these issues, I can say ‘over my dead body will I allow ratepayers to be paying for this,’” Fenberg said. 

Xcel, and all utility companies, must make a case to the Public Utilities Commission (PUC) and get approval before passing on costs to customers. 

On Friday morning, 9NEWS emailed Xcel three questions: 

One asked if Xcel can seek recovery from customers for any costs related to Marshall Fire lawsuits. 

Another asked if Xcel can seek cost recovery related to legal needs for Marshall Fire lawsuits. 

And the last asked if Xcel would commit to not seeking cost recovery for any Marshall Fire-related legal fee or damages. 

Xcel did not respond on Friday. 

“It’s up to the Public Utilities Commission on what is and what is not recoverable by ratepayers for a regulated utility,” Fenberg said. “I would hope that the commission is in a period right now where they would be extra skeptical and thoughtful about what they do and don’t approve.” 

Xcel does have to be brutally honest with shareholders. 

In February, Xcel filed its 10-K annual report to investors. 

There is a three-paragraph section entitled “Marshall Wildfire.” (PSCo refers to Xcel’s Colorado name of Public Service Company of Colorado) 

In December 2021, a wildfire ignited in Boulder County, Colorado (the “Marshall Fire”), which burned over 6,000 acres and destroyed or damaged over 1,000 structures.  Boulder County authorities are currently investigating the fire and have not yet determined a cause. There were no downed power lines in the ignition area, and nothing the Company has seen to this point indicates that our equipment or operations caused the fire. In Colorado, the standard of review governing liability differs from the “inverse condemnation” or strict liability standard utilized in California. 

In Colorado, courts look to whether electric power companies have operated their system with a heightened duty of care consistent with the practical conduct of its business, and liability does not extend to occurrences that cannot be reasonably anticipated. In addition, PSCo has been operating under a commission approved wildfire mitigation plan and carries wildfire liability insurance. 

In March 2022, a class action suit was filed in Boulder County pertaining to the Marshall Fire. In the remote event PSCo was found liable related to this litigation and were required to pay damages, such amounts could exceed our insurance coverage and have a material adverse effect on our financial condition, results of operations or cash flows. In June 2022, Plaintiffs served the class action lawsuit. In July 2022, PSCo filed a Motion to Dismiss. The District Court judge presiding over the case denied PSCo’s Motion to dismiss in December 2022. 

The second paragraph said that Colorado courts look to see if an electric company operated with a “heightened duty of care” and if so, liability does not extend to “occurrences that cannot be reasonably anticipated.” 

In other words, if Xcel has proper maintenance and something unexpected happens, the company may be protected from legal liability. 

The last paragraph said that “In the remote event [Xcel] was found liable… and were required to pay damages, such amounts could exceed our insurance coverage.” 

That paragraph goes on to say that would have a negative effect on operations and cash flow. 

Two former PUC commissioners told 9NEWS that Xcel would have insurance to cover certain amounts of liability. 

Payment for the insurance coverage in the first place can be passed on to customers. 

Xcel makes its profits on building infrastructure. 

Fenberg said that Xcel would not be able to just recommend building new infrastructure to generate new money to pay off any legal issues. 

“They can’t just propose big investments in new coal plants or power plants or generation assets out of the blue,” Fenberg said. “These aren’t things they can just propose willy-nilly, they are years in the making.” 

He did say there could be reasons that the PUC could consider allowing new infrastructure expenses related to the Marshall Fire. 

“What would be more responsible and, maybe potentially a win-win, is propose undergrounding your wires,” Fenberg said. “It’s money that goes towards the utility, and they do make, of course, a profit off of any of that type of infrastructure investment, but the payoff could be enormous for ratepayers, for consumers, for homeowners, for the entire state.” 

Fenberg said that if legislation were needed to be more specific to the PUC about what should or should not be passed on to customers, he would consider another bill next legislative session. 

“It’s always helpful for the legislature to provide more explicit direction, and that’s something we’re going to look into and have conversations with, and if it’s necessary and if it would be helpful, we absolutely, I think, would rise to that occasion and make sure we are clarifying in law what is and what is not in the interest of ratepayers when it comes to cost recovery,” Fenberg said. 


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