Xcel Energy wants to charge its Colorado customers $589.7 million during the next five years to reduce their risk of causing wildfires, but consumer advocates aren’t buying it.
Xcel’s subsidiary, Public Service Company of Colorado, has cited the catastrophic wildfires in California started by Pacific Gas and Electric as motivation for the proposal. Xcel, which has 1.5 million electric customers in the state, is asking customers to pay for the work with a monthly fee on their bills.
While the cost is relatively small — less than 1% of a bill’s monthly total — groups representing consumers and businesses say Xcel should spread out some of the financial burden for this work to shareholders and not just customers, especially during an unstable economy.
The state Office of Consumer Counsel, which represents residential and small-business customers, and Colorado Energy Consumers, representing some of the state’s largest commercial and industrial electricity customers, also disagree with the proposal’s focus on preventing what modeling says has a 1% likelihood of happening.
“Mitigating the effects of climate change, including potential wildfire risks, is definitely in the public interest. But we’d like to see it done in a way that shares any risk between consumers and the company’s shareholders,” OCC director Cindy Schonhaut said. “We don’t want to see the tragedies that happened over the last few years in California with wildfires and utilities become an opportunity to create a windfall for the utility.”
The debate on Xcel’s request is outlined in filings and hearings before a Public Utilities Commission administrative law judge that concluded Tuesday.
Colorado is still reeling from the worst wildfire year on record. Hundreds of thousands of acres burned, fueled in large part by an extended drought. Three of the state’s largest recorded wildfires — Cameron Peak, East Troublesome and Pine Gulch — occurred in 2020.
Filed with the PUC on July 17, the proposed Wildfire Protection Rider would charge customers based on the amount of electricity used, through the end of 2025.
Xcel was allowed to increase customer bills in 2019 to cover approximately $11 million spent on previous wildfire mitigation work, but the PUC required the company to develop a more comprehensive plan for future projects. The new plan would guide projects — including vegetation management and infrastructure updates in a designated Wildfire Risk Zone — that the proposed rider would fund. The rider would also pay for some work the company did in 2019 and 2020.
Both the company and consumer advocates support the mitigation work outlined in the WMP, though they disagree on how to fund it.
A rider allows a utility to recoup costs from projects almost immediately, instead of waiting years to ask the PUC for an official rate increase. The rapid repayment lowers the risk for a company’s shareholders, but could end up overcharging customers in the short term. Xcel has promised a yearly true-up process that would refund customers if the rider collects more than the utility needs.
In an official rate increase process, companies’ requests to raise rates can be denied or adjusted, meaning the money they’ve already spent may not be fully recouped through ratepayers. Xcel executives have, especially since the beginning of the pandemic, said the company intends to avoid rate cases. In Xcel’s second quarter earnings call, Chief Operating Officer Bob Frenzel stated the company’s rate case aversion to stakeholders.
But the Office of Consumer Counsel has argued that a rate case is the most appropriate way to recover the cost of wildfire mitigation, especially for scenarios that have less than a 1% chance of occurring.
Xcel has cited the 2018 Camp fire in northern California as a significant motivator for accelerating its wildfire mitigation work. The rider proposal comes just over two years after the Camp fire burned more than 153,000 acres, destroyed nearly 19,000 buildings and killed 85 people. The fire started from a faulty electric line owned by Pacific Gas and Electric and was the most costly disaster of 2018 at $16.5 billion in total losses.
PG&E filed Chapter 11 bankruptcy soon after the fire. CEO and President Bill Johnson pleaded guilty to 84 counts of involuntary manslaughter and one felony count of unlawfully starting a fire in a county court last year on the company’s behalf, accepting a $3.5 million fine and $25.5 billion settlement.
In testimony to the PUC, Xcel Regional Vice President for Rates and Regulatory Affairs Brooke Trammell said the risk of a utility-related fire in Colorado like that of the Camp fire is relatively low, but taking steps to mitigate such a disaster would reduce the potential cost of recovery to $1 billion from $2.6 billion. Equipment worth $2.4 million was damaged in the Grizzly Creek and Williams Fork fires, the company told The Colorado Sun.
“We believe that the company’s focus on preventing the most catastrophic wildfires is the most appropriate and prudent course of action given the potential consequences of such an event to the public and the environment,” Trammell wrote in testimony filed with the PUC, adding that the company “does not agree that it is sound regulatory policy to wait for a disastrous event to occur before taking remedial action to solve or mitigate the risk.”
Xcel has already been doing work aimed at preventing utility-caused wildfires and has said it will continue to do this work if the mitigation plan is approved without the rider. The company says that a rider would help accelerate the pace of projects, but the OCC has argued an accelerated pace is not necessary to prevent scenarios with a low likelihood of occurring.
The Office of Consumer Counsel partnered with Colorado Energy Consumers and PUC staff to offer a stipulation, or settlement, to Xcel that would accept the plan as written. Instead of a rider, the company would be allowed to defer the cost of the highest risk infrastructure improvements until it comes before the PUC for its next rate case. Xcel opposed the terms.
A PUC administrative law judge is expected to make a recommendation to the commission on both the plan and the rider within a few weeks.