Colorado utility regulators — using the mandates in a 2023 law — are looking to carve lobbying fees, trade association dues and investor relations costs from Xcel Energy rate requests. In a current gas rate case, more than $775,000 in such costs were disallowed.
The figure in the future could be a lot higher based on the Colorado Public Utilities Commission decision in October ordering Xcel Energy to remove all investor relations costs — including a portion of executive salaries — from its calculations of costs passed on to customers.
“There is an inherent tension between customer benefits and investor benefits,” said Joseph Pereira, deputy director of the Colorado Office of the Utility Consumer Advocate, which represents residential and small commercial customers before the PUC. “Customers shouldn’t pay to boost the share price.”
In the wake of soaring utility bills in the 2022-23 winter, when the average gas bill rose 52% for residential customers of Xcel Energy’s subsidiary Public Service Company of Colorado, the legislature convened a special committee to investigate rates.
The result of that inquiry was Senate Bill 291, which aims to avoid the bill shock customers experienced. It also took aim at 15 types of expenses that should not be paid by customers, such as a portion of board of directors’ compensation, travel and entertainment expenses.
The commission is still working on setting the rules to comply with Senate Bill 291. The PUC is using interim rules for the gas rate case.
Xcel Energy was seeking a $172 million increase in gas rates. The PUC granted the company a $130 million increase, with a $15 million adjustment for depreciation expenses, raising the average monthly household bill 7.7% or $4.57 and small commercial bills by $17.49.
Colorado customers like people everywhere in the county are concerned about how high their energy bills have become,” said David Pomerantz, executive director of the nonprofit Energy and Policy Institute. “Underlying a lot of those concerns, is how politically powerful utilities are and how they are paying for that with money that’s not theirs.”
3 other states keep corporate costs from being charged to consumers
Connecticut, New Hampshire and Maine have passed laws similar to Colorado, and bills have been filed in 11 other states seeking to limit lobbying and other charges, Pomerantz said.
In a recent Xcel Energy gas rate case in Minnesota, the Citizens Utility Board, a nonprofit consumer advocate, challenged the dues paid to the American Gas Association, a trade group, and the Chamber of Commerce, noting that those charges are excluded by statute in Colorado.
In a settlement agreement, Xcel Energy agreed to remove the dues from customer charges.
“Colorado is a little ahead of the game compared to other states,” Pomerantz said. “They and Connecticut were the first states to take a whack at this.”
While there is a long list of costs to be excluded, in the gas rate case, the commission honed in on four: lobbying expenses, investor relations expenses, trade association dues and attorney and consultant fees in rate cases.
Xcel Energy in its filings maintained that many investor costs are required, such as U.S. Securities and Exchange Commission filings, the provision of disclosures to current and potential investors as required by law, and listing fees, including those required by stock exchanges.
“These costs for the company are unavoidable costs and are by definition prudent since they are required by law, regulation, and/or stock exchanges that give the company access to external capital,” Xcel Energy said in a filing.
The PUC, however, said that prohibition in Senate Bill 291 is “unambiguous.”
“We therefore direct Public Service to remove from its revenue requirement calculations all investor relations expenses,” the commission said.
But what that figure is and how to calculate it have yet to be determined since it will rely on computing the time spent and salaries of all employees involved in investor relations, all the way up to top executives and the CEO.
“You know, a big part of their responsibility is investor relations,” Commissioner Tom Plant said during one meeting reviewing the rate case. “It’s maximizing shareholder value. It’s maximizing return to investors.”
“And what we know from the statute is that that is not a role that the legislature has said is attributable to ratepayers,” Plant said. “But we don’t know what that line is, we don’t know where we draw that line.”
In its decision the commission said “the company shall provide a full accounting of time spent by the company’s employees, including executives, in raising capital and any other aspects of investor relations.”
The commission did remove $142,000 in investor-related expenses from the rate case.
Xcel is the top spender on lobbying in Colorado
The decision was similar regarding lobbying. Xcel Energy has consistently been the top spender on lobbying at the Colorado statehouse. In the 12 months ending in July, it spent about $297,000 on lobbying.
Those expenditures for registered lobbyists are not included in charges to customers, but under questioning from Commissioner Megan Gilman, Xcel Energy executives said there is no accounting for the company employees who spend time in lobbying activities.
“From the executive level on down, there are individuals within the organization directing, strategizing, analyzing potential proposed or enacted legislation and trying to influence those outcomes on behalf of the company,” Gilman said. “And so, it seems to me, we’re likely missing quite a bit of information here that would be helpful and necessary to ensure compliance with 291.”
The PUC ordered Xcel Energy to update its 2023 annual report to show the portion of total compensation for company employee lobbying and to track and report those expenses for 2024 and each year through the next rate case.
Finally, the commission told the company to track employee lobbying expenses from Jan. 1, 2024, on in a separate account to determine in the next rate case whether a refund is due to customers.
Xcel Energy also argued that in addition to lobbying and political activities the American Gas Association provides educational and professional activities and that part of its dues to the trade group should be allowed. The commission rejected the argument and the full $503,000 in dues was removed.
Xcel Energy declined a request by The Colorado Sun for comment.
The cost of attorneys and consultants have long been paid for by customers in rate cases. “Such expenses are a legitimate cost of providing utility service,” the commission said.
Xcel Energy sought $1.6 million in legal and consulting fees to be put into rates. The PUC staff in a filing said that was an improvement over the $2.2 million the company requested in its 2022 gas rate case, but the staff recommended a $1.3 million cap on expenses.
The company spent $260,000 on consultants and the commission split that cost between the company and customers with each responsible for half, leaving Xcel Energy able to recover $1.47 million in costs.
While these are small-dollar battles in a $171 million rate case, Pereira, the utility consumer advocate, said they are important in changing the dynamics in the legislature and at the PUC.
“Maybe Xcel decides it doesn’t want to pay for 10 people lobbying,” he said. “Maybe it changes how they approach a rate case.”
When it becomes clear how much Xcel Energy is spending stockholders may also have a say. “There are monetary savings for customers but also a quantifiable way for shareholders to decide if they want to pay for those activities,” Pereira said.
“SB-291 has to be the most influential customer-focused bill we’ve seen in a decade or more,” Pereira said.