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Judge says it's fair for Xcel to charge customers for costs incurred during '21 winter storm

State regulators in Colorado still have to vote on the next step.

DENVER — Xcel Energy is significantly closer to getting permission to recover more than $500 million from customers because of increased energy use during a cold snap in mid-February 2021.

An administrative law judge ruled this week that Xcel could recover $221 million from electric customers and $287 million from gas customers. It's estimated that would be an 11% bill increase for residential gas customers and a 2% increase for electric.

Because of weather conditions at the time of that winter storm, multiple Colorado energy companies, including Xcel, purchased high-priced natural gas when it was upwards of 100 times the usual price. In a filing for investors last year, Xcel reported that it spent more than $600 million in extra electricity and natural gas fuel costs that February.

The judge determined that "inherently, this is a question about whether the utility prudently incurred the costs that it seeks to recover. Prudency for cost recovery cannot be determined based on the perfection of 20/20 hindsight. But, a hindsight review is appropriate to determine how to address similar issues moving forward."

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Per the decision documents, the cold temperatures across the country "elevated demand for heating and power coupled with disruptions in natural gas production due to freeze-offs and gas pipeline impacts."

The storm particularly brought attention to Texas, where the state power grid suffered a major failure at a time of record-low temperatures.

At the same time, Denver endured a 12-day stretch of below-freezing temperatures with a record-breaking low of -14 on Valentine's Day, and a near-record -16 the next morning. The town of Crook earned the dubious honor of scoring Colorado's lowest temperature that week: -33 degrees.

Many comments from the public suggested Xcel should have been more prepared for cold weather and its effect on the market, especially because extreme cold is not unusual in Colorado. Therefore, commenters said investors and the company should bear the costs rather than customers.

The judge determined natural gas planning is "not quite as straight-forward as comments imply," and Xcel typically does make efforts to store and buy gas in a reasonable way that satisfies the market.

Regarding this specific weather system, Xcel's company meteorologists did not anticipate the extreme temperatures to come when they made predictions in late January. Therefore, Xcel did not see the need to buy additional supply at that time. 

As the storm got closer, forecasts changed and the price of gas surged.

Xcel had to decide on a purchase for supply for the next four days on Feb. 12, 2021, because of the upcoming Presidents Day weekend, and the company had to pay the going rate.

The judge said the company "failed to act prudently when it did not issue conservation messaging." Ultimately, however, the judge determined Xcel did not act perfectly ahead of the cold snap but, overall, did act prudently given the information the company had at the time.

"While it would be ideal for customers not to pay for the gas commodity market’s unreasonable gas prices, that is not the regulatory framework under which Colorado utilities operate," the decision also said.

The Public Utilities Commission (PUC), the group of state regulators in Colorado, will next have to vote on a decision.

Friday, Colorado Gov. Jared Polis (D) slammed the judge's decision.

"I am disappointed that utility providers are able to balance their financial loss on the backs of consumers, when extra costs could have been avoided by better early warning systems for consumers to voluntarily reduce energy usage. This ruling acknowledges that Xcel did not properly prepare or warn Coloradans ahead of the storm, yet consumers are now literally forced to pay the price. This is another example of why it is so important that we continue to move away from natural gas to avoid these types of unpredictable price spikes in the future, and I urge the PUC to establish specific actions to take regarding voluntary usage reductions prior to imposition of any extraordinary fees for future events. Colorado consumers fared better than Texas consumers from the events in February 2021, but it really is unfair that Coloradans are paying any price. We are taking bold steps to help Colorado consumers and avoid any future surcharges like this by investing in wind and solar energy, and helping Coloradans move to use of high efficiency electric heat pumps for heating their homes, so that Coloradans are not beholden to the unpredictable price spikes of a globally traded commodity."

A bill requiring utility companies to notify customers when severe weather could impact energy bills died in the state legislature in April.

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