A plan by Xcel Energy that would help reshape Colorado’s energy future has raised concerns about whether the utility is proposing more power than it will need and what that will mean for customers paying the bills.
Xcel has proposed strategies for providing electricity across its territory in Colorado while meeting growing demands for power and preparing to close its last coal plant by the end of 2030. What’s called a just transition plan includes ways to assist communities facing the loss of jobs and revenue as retirements of the utility’s coal facilities are accelerated.
But in a recent hearing, the chairman of the Colorado Public Utilities Commission questioned Xcel about a forecast that residential customers could see a roughly 50% increase in rates in 2031 when compared with 2024 levels while commercial and industrial rates remain flat.
The Office of the Consumer Utility Advocate filed a new document with the PUC that said questions about which customers will bear the brunt of serving “large load” users, such as data centers, “are the most significant issues” for the office.
A filing by two environmental groups said Colorado “stands at the precipice of allowing a massive cross-subsidy from existing ratepayers to new large load customers.” The current approach to allocating costs “grossly underrepresents the system costs driven by new large loads,” Western Resource Advocates and the Southwest Energy Efficiency Project said.
“This has just really ballooned beyond what we need. I think it’s just an oversized plan and the PUC needs to right size it,” said Danny Katz, executive director of the CoPIRG Foundation, a consumer advocacy organization.
Katz said Xcel’s plan for up to 14 gigawatts of new electricity is beyond what it will need to replace the output from its coal facilities, including the 750-megawatt unit of the Comanche Generating Station in Pueblo. The unit would be Xcel’s last coal plant in Colorado.
There are 1,000 kilowatts in a megawatt and 1,000 megawatts in a gigawatt. There are different variables, but a 1 gigawatt facility could power about 340,000 homes, according to the Energy Information Administration.
Xcel wants to replace the power being turned off with more wind and solar power, battery storage and natural gas.
Ratepayers left on the hook?
Katz said it’s reasonable for Xcel to plan for new generation considering demands created by more electric vehicles, heat pumps, further electrification of buildings and the prospect of more data centers opening in the state.
“But there’s no guarantee that we’re going to see as big of an increase in energy needs for these data centers,” Katz said. “History has shown us there have been projections where energy growth is going to be huge and it wound up not meeting those expectations and led to overbuilding the energy grid at higher costs.”
He also criticized sections of the plan that would establish a $500 million fund to pre-purchase equipment and another fund for emerging technologies. CoPIRG held a news conference Thursday to encourage members of the public to comment on Xcel’s plan.
“It’s critical the PUC only approves what is needed and doesn’t leave ratepayers on the hook for any unnecessary expenses,” said Katz.
The PUC has gathered comments and testimony and is expected to start deliberations in early to mid-August. Other proceedings will deal with what costs the PUC will authorize Xcel to recover from ratepayers.
Even people who question Xcel Energy’s proposal acknowledge the challenges the utility faces. Xcel, Colorado’s largest electric utility, must meet state goals for cutting greenhouse gas emissions; forecast and prepare for anticipated higher-than-normal demands for electricity; help provide a just transition for workers and communities affected by coal facility closures; and build out new power sources when federal incentives and programs for renewable energy are disappearing.
Besides Pueblo, Moffat, Routt and Rio Blanco counties, home to coal plants and mines, will be hit hard by the phasing out of coal operations.
Xcel Energy spokeswoman Michelle Aguayo said the company is investing in reducing wildfire risks across its system, enhancing the distribution grid to meet growing customer needs and to integrate electric vehicles, solar installations and storage batteries.
“For the last several decades, energy growth has been flat as technological efficiency combined with our nationally recognized energy efficiency programs have allowed customers to do more with less consumption. That dynamic is changing and with that, how we plan our system must change as well,” Aguayo said in an email.
The demand for power could grow at a compounded rate of 4% through 2031, compared with an average annual rate of 0.7% over the past five years, according to a forecast Xcel filed with the PUC. In 2024, Minneapolis-based Xcel Energy said it planned to spend $45 billion on capital investments in the next five years, with about $22 billion of that targeted for Colorado.
The company said the surge in demand for electricity is being driven by the electrification of homes, businesses and transportation and the need for more power to run large computing centers as the use of artificial intelligence expands. Data centers consume large volumes of electricity and water for cooling.
Xcel, which serves portions of eight states, said a substantial portion of the growth in its data-center customers will likely be in Colorado.
However, Western Resource Advocates and the Southwest Energy Efficiency Project said in their filing that Xcel Energy has seen requests from large-load users withdrawn during consideration of the company’s plan. They said the record in the case shows that service requests from data centers in particular are speculative.
What more data centers might mean for Colorado customers came up during a June 23 PUC meeting on Xcel’s plan. Eric Blank, commission chairman, asked about Xcel’s forecasts showing that residential customers could see their rates jump by roughly 50% by 2031 over 2024 rates while bills for commercial and industrial customers could remain flat.
“You can see the commission’s concern with this larger residential rate increase, while the (commercial and industrial) transmission rates are declining in real terms,” Blank said.
Jack Ihle, Xcel’s regional vice president for regulatory policy, replied that upgrades to the distribution system and other costs affect residential customers but not commercial and industrial ratepayers. He added there’s room to consider how costs are allocated among different types of customers.
Recommendations to the PUC on Xcel’s proposal include creating a rate class just for customers consuming large loads of electricity.
Aguayo said the projected rates show trends and aren’t meant to be as accurate as calculations in a rate-setting case.
“To address how costs are allocated across customer classes, in an upcoming proceeding we will engage with the Commission and stakeholders on the appropriate allocations, terms, and conditions for new large loads,” Aguayo said. “To be clear, we will not engage in contracts with data centers that will disadvantage our residential customers.”
