Colorado co-ops say Xcel Energy mismanaged natural gas supplies during 2021 storm
Energize Weekly, January 11, 2023
The fallout from the soaring natural gas prices created by Winter Storm Uri in 2021 continues as four rural Colorado electric cooperatives have filed a complaint with federal regulators saying they were overcharged by their wholesale electricity supplier, Xcel Energy.
In their filing, the four co-ops contend that Xcel Energy mismanaged its natural gas supplies and was then forced to buy expensive gas on the spot market leading the utility to charge the co-ops an extra $17.5 million for gas.
The cooperatives – CORE Electric, Holy Cross Energy, Grand Valley Power, and Yampa Electric – want the Federal Energy Regulatory Commission (FERC) to order Xcel Energy’s subsidiary, Public Service Company of Colorado (PSCo), to return $6.9 million.
“We have serious concerns that a substantial portion of Xcel’s fuel costs were entirely avoidable,” Tom Walch, CEO of Grand Valley Power, said in a statement.
“We feel we have a duty to our members, the ones who ultimately pay Xcel’s charges, to challenge these costs,” Walch said. “It is especially critical for us to protect our members from preventable runaway costs coming from future weather events.”
The four cooperatives provide electricity to 570,000 customers across primarily rural parts of Colorado.
In February 2021, a severe winter storm hit the Southwest and central U.S. boosting electricity demand, disabling Texas natural gas production, and leading to the spot market price for 1,000 cubic feet of gas jumping to $200 from $3, according to the complaint.
Xcel Energy exacerbated the situation, the complaint said, by not following its own monthly supply plan and by shifting natural gas to cover reserves rather than using it to make electricity, necessitating the purchase of more spot market gas.
“PSCo’s failure to adhere to its Month Supply Plan caused the company to purchase significantly more spot gas,” the complaint said. “Actions a reasonable utility management would not take, constituting evidence of more than a ‘bare allegation of imprudence.’”
Based on documents the co-ops obtained from Xcel Energy, the complaint said that between Feb. 13 and Feb. 17, the utility diverted 120 million cubic feet of gas per day from generation supplies to meet reserve requirements.
“Through the course of almost two years of investigation, what the wholesale customers were able to find was that Xcel wasn’t following its own planning process,” said Amber King, a spokeswoman for CORE Electric. “They didn’t have enough fuel to begin with and then on top of that there was the winter storm.”
Minneapolis-based Xcel Energy is an investor-owned utility operating in eight states and is the largest electricity provider in Colorado. In a statement, the company defended its handling of the price shocks created by the winter storm.
“Winter Storm Uri in February 2021 was a massive storm impacting many states, including Colorado, causing the market to respond dramatically,” Xcel Energy said.
“Our gas purchasing practices before and during the storm were prudent, consistent with the law and our contractual obligations and ensured continued energy service for all customers – wholesale and retail – during the unprecedented storm,” the company said.
The wholesale customers have the right to review the data on natural gas supplies and purchases, but were repeatedly stonewalled by Xcel Energy, according to the complaint.
“We still have not received all the documentation,” King said. “We are still not sure what the full weight of the damages would be.”
“We’re disappointed we could not come to a resolution with our wholesale customers and remain hopeful we can find a resolution,” Xcel Energy said. “We will be responding to FERC with a full description of the prudent measures we took to serve our customers during Winter Storm Uri.”