Xcel Energy recovering natural gas costs; electric associations paying millions
When a deep freeze gripped eastern Colorado, Texas and a big chunk of the country in February, Tom Walch was at home in Grand Junction, where it was much warmer.
“I remember looking and checking the app on my phone and saying, ‘Gosh it’s zero degrees in Denver. It’s zero degrees down in Texas. Boy, I sure am glad we don’t have this,’” said Walch, the CEO of Grand Valley Power, an electric cooperative.
For Grand Valley and three other member-owned rural cooperatives, their storm hit a couple of weeks later. That’s when the four utilities, wholesale customers of Xcel Energy-Colorado, got their February bills — millions of dollars more than they expected. For the Yampa Valley Electric Association, the monthly expense amounted to 30% of what it typically budgets for a whole year’s worth of power.
Xcel Energy’s retail customers, including households and businesses, are also facing higher bills as a result of the sub-zero weather that knocked out power plants and taxed natural gas supplies from Texas through the Midwest. The big difference is that Xcel, Black Hills Energy and other regulated utilities must get approval from the Colorado Public Utilities Commission before raising rates for retail customers to recoup the steep costs they sustained in February.
Grand Valley Power, Yampa Valley and two other Colorado cooperatives, Holy Cross Energy and the Intermountain Rural Electric Association, aren’t under the PUC’s jurisdiction. They have contracts with Xcel Energy that allow the power provider to pass on its costs. In addition to their local governing boards, the cooperatives are subject to the Federal Energy Regulatory Commission’s oversight.
Alice Jackson, Xcel Energy-Colorado president, said the utility is working with all its customers to moderate the impacts and consider any necessary changes.
As the PUC investigates whether the utilities could have cut costs by buying natural gas sooner or asking customers to reduce use, the four electric cooperatives have paid or are in the process of paying their hefty bills. At least two of them will ease the pain for their members by spreading out the increases.
The Yampa Valley Electric Association in Steamboat Springs is spreading out the payments for residential and business customers over seven months, said Steve Johnson, the cooperative’s general manager. Yampa Valley has established a short-term line of credit to help cover the $9.78 million bill, about $6.4 million more than it normally budgets.
Grand Valley, whose usual bill for February is around $1.2 million, got charged a $2.37 million “fuel cost adjustment.” Walch said. Members will be allowed to pay their share over 12 months.
“We’re not doing like Xcel did. We came out from the beginning and said we’re not going to require anybody to pay all of this upfront,” Walch said.
Xcel offered to give the cooperatives six months to pay the bills and arrange a loan. But Walch said Grand Valley set up its own line of credit at a much lower rate.
Xcel Energy was confronted with historically high prices over “a very short period of time,” Jackson said.
During the deep freeze Feb 13-16, natural gas prices skyrocketed. Prices were around $3 per million British Thermal Units and then shot up 6,000% to $180 per unit in the region and even higher in other states. Xcel Energy, the state’s largest electric utility with 1.5 million customers, said its demand for service was double what’s typical.
“We have been working with our wholesale customers as well as our retail customers extensively on the impacts of that commodity price spike,” Jackson said. “And hindsight being 20/20, you look back and go, ‘OK, what other processes or procedures do we need to update and put in place in order to improve in the event that this happens to again.”
Better communication would be a start, the cooperatives agreed.
“A lot of this happened without us even being informed that we were exposed to these high prices. We weren’t given an opportunity to reduce our demand or manage our costs in any certain way,” said Bryan Hannegan, president and CEO of Holy Cross Energy in Glenwood Springs.
Xcel Energy charged Holy Cross $2.25 million in connection with the February storm. The cooperative has other sources of power so its exposure wasn’t as great, Hannegan said. And Holy Cross will tap a rainy day fund rather than pass the cost onto its members.
Johnson at Yampa Valley said the cooperatives got a notice from Xcel Energy on a Friday that the bill they would get the following Monday would be larger than usual, but no specifics. “In our case, it was four times what it would normally be.”
- Colorado’s $1B utility bill for February’s big freeze has given regulators a lot to ponder
- Power cuts in Texas and elsewhere could cost Colorado energy consumers
- Lawmakers don’t want Colorado to be like Texas; they want to make state’s electric grid regional
The cooperatives are exploring how they ended up with the huge bills and ways to avoid similar situations.
“That’s one of the reasons you see a lot of electric cooperatives pushing for Colorado to join a regional transmission organization and a larger wholesale market because then we wouldn’t be reliant on one or two suppliers,” Hannegan said.
The Intermountain Rural Electric Association in Sedalia got a bill for more than $8 million to cover the increased power costs from the February storm, spokesman Josh Liss said in an email.
“As a not-for-profit electric cooperative, we do not have the same cost recovery mechanisms available to us that a for-profit investor-owned utility like Xcel does, so an unexpected bill like this is troubling, to say the least. We are currently pursuing every path available to us to minimize the impact this pass-through from Xcel will have on IREA’s members,” Liss said.