Xcel profits keep rising but legislation may blunt natural gas impacts on Colorado bills

Xcel Energy profits increased in the first quarter, despite a similar increase in revenue from electricity and gas bills.

The Denver metro area's largest utility, Xcel, is lobbying to change state legislation to protect customers from future natural-gas price swings. This would allow the company to take on more risk and not pass it along to their customers.

Last week, the utility company and a subsidiary from Minneapolis based Xcel Energy Inc. reported generating $214 millions in profits in the first quarter on sales of $1.75 billion of electricity and gas to Xcel customers in Colorado.

Xcel Energy reported that its electricity sales revenue increased by 11.1% over the previous year, but it was natural gas that drove this growth. Xcel Energy Colorado’s 1.5 million customers of natural gas paid $811 millions in first-quarter fees, which is 40% more than in the first quarter 2022.

The price of natural gas skyrocketed in the spring and summer following Russia's invasion into Ukraine. Under Colorado utility rules, Xcel passed this increase directly to its customers, without any markup.

The bill, introduced on April 20, is intended to protect Colorado's largest utilities' customers from price fluctuations.

Xcel Energy was initially concerned about the new legislation, and the fact that it lacked certain price-reducing strategies. These included long-term contracts, natural gas hedging, and increased gas storage.

Bob Frenzel said, CEO of Xcel Energy on a call with Wall Street analyst, that some amendments made last week have improved the bill to a point where the utility is happy with it.

He said: 'We will continue to monitor it as it passes through the House. But as it is, I believe it's a thing that we can work on.' We think that the decision-making is still left to the Colorado Public Utilities Commission. We would be happy to work with them and their staff in order for some of the legislation to be implemented through the regulatory process.

The amendments made by the state Senate committee will allow the company use of financial hedging and increased storage to prevent short-term price fluctuations in natural gas.

The legislation, along with its original goal of making Xcel bear more of the financial risks of natural gas prices volatility by 2025 - and to spread the gas purchase costs over several years of bills for customers - would also allow Xcel smooth out any short term cost increases. This is instead of passing on price changes to customers directly.

Xcel residential and commercial gas customers spent $811 million in the first quarter on natural gas. This is a jump of 40.3% over what they paid for the same quarter in 2022.

Price hikes led to a series public hearings at the PUC, and in a special state legislative committee. This gave birth to the bill that is now making its way through state Legislature.

Xcel has been to the PUC 4 times in the winter to lower natural gas rates due to a steady decline in wholesale costs. The natural gas price is 58% less than what the company started with in 2023, and will appear on the bills of customers for the rest of the year.

Frenzel stated that if the modified version of Senate Bill 22-391 (also known as SB23-291) becomes law, and specifics implemented by PUC are followed, it will reduce the likelihood future natural gas prices will swing as much, if they become law.

I think that it is a tool for both the front and back ends of the gas acquisition cycle. Think about hedging tools on the front-end of the cycle and rethinking the long-term storage – physical and financial hedging, and other things of that nature. The legislation also looks at the back-end of the cycle, in case there is price volatility which exceeds forecasts. We then look at mechanisms to deferrals in order that it might not be felt instantly in the pockets of our customers.