Xcel CEO Dick Kelly (Xcel)

Arguing on behalf of the Colorado Office of Consumer Counsel (OCC), the attorney general’s filing takes issue with a proposed settlement in the ongoing Xcel [Public Service Company of Colorado] rate case that enters into final deliberations before the PUC on Thursday in Denver (pdf).

“A settlement joined by only three of more than 30 interveners is aptly described as ‘four parties with a joint position,’” First Assistant Attorney General Stephen Southwick wrote in a filing last week. “It hardly constitutes settlement of a litigated rate case. In an agreement among such a small number of parties, the [PUC] must consider carefully whether the proposed settlement issues are in fact in the public interest.”

Earlier in November, Xcel offered to lop $44 million off its nearly $180 million initial request for a rate increase to cover the costs of the new Comanche 3 coal-fired power plant near Pueblo, smart-grid technology in Boulder, two gas-fired power plants at Fort St. Vrain and other power line and distribution upgrades.

That settlement was reached with two consumer groups, Energy Outreach Colorado and Colorado Energy Consumers, but still would result in a rate increase for the average residential consumer of $4.66 a month. And that increase comes hard on the heels of a $112 million rate increase granted Xcel by the PUC last summer.

“The OCC finds this settlement agreement to be contrary to the public interest and recommends that the [PUC] reject the settlement agreement,” Southwick wrote, agreeing with the PUC’s proposal to base a rate increase on a historic test year with adjustments for all the power plant additions. “However, the OCC continues to recommend that just and reasonable rates would ensue from the [PUC] granting a rate increase amounting to about $33 million.”

Other interveners mentioned the disproportionate percentage of revenue Xcel, a Minnesota-based investor-owned utility, continues to derive from Colorado, where the company is seeking its third rate increase in the past four years.

Leslie Glustrom of Boulder-based Clean Energy Action points out in her filing on the settlement agreement that Colorado’s share of Xcel’s overall earnings has increased from 42.5 percent in 2006 to 52.7 percent in 2008, before either last summer’s or the current rate increase have even been factored in. Meanwhile, Minnesota rate payers contributed 44.3 percent of Xcel’s overall earnings in 2008, down from 47.4 percent in 2006.

“Xcel’s financial metrics look very healthy,” Glustrom wrote in her filing, noting the 10.5 percent return on equity for Xcel that’s built into the settlement. “In contrast, the financial status of [Colorado] rate payers appears seriously stressed.”

Dennis Kelly, attorney for the Arapahoe County-based activist group ArapaHope Community Team, addressed what he considers excessive travel and entertainment expenses and employee bonuses being passed onto rate payers.

Xcel already trimmed some of those costs from the current rate case, responding to concerns from activists and inquiries from the PUC, but Kelly and Glustrom would like to the see the PUC establish a permanent policy on such expenses. A spokesman for the PUC indicated to The Colorado Independent that that was probably not going to happen at Thursday’s deliberation and would likely require a separate hearing if the PUC decided to go that route.

“I continue to think the PUC could set a rate case policy related to these wining-and-dining expenses as part of the rate case, but either way, it is long past time for the Colorado PUC to hold a lot firmer hand on our monopoly utility that exists to serve its shareholders first, its ratepayers not so much,” Glustrom said in an e-mail.

Kelly said he’s concerned that both the PUC and the Office of Consumer Counsel are both understaffed and therefore unable to fully delve into all the expenses Xcel tries to pass on to ratepayers. He said it may be something the State Legislature will need to take up.

“We have already been in touch with some state senators and representatives regarding the understaffing of the [PUC] — I was told that they have about 15 unfilled positions — and the OCC, they have about three or so unfilled positions,” Kelly said in an e-mail.

“This is ironic since both are funded by fees assessed against utilities rather than by tax money. In any event, yes, we are going to try to get the ear of some key legislators to see if they can provide some response — although it may be a bit late for legislation in the upcoming session [in January].”

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Note: The original version of this story made it seem that the attorney general’s office was arguing for the rate cut on its own. In fact, the AG was required by law to make the request on behalf of the Colorado Office of Consumer Counsel (OCC). State statute requires the attorney general to represent government entities such as the OCC.

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In a settlement with Energy Outreach Colorado and the Colorado Energy Consumers, Xcel agreed to only seek an annual electric rate increase of $136 million, mostly to cover more than $1.7 billion the company invested in the new Comanche 3 coal-fired power plant near Pueblo, two new gas-fired power plants at Fort St. Vrain, a smart-grid project in Boulder and other power line and distribution expenses.

If approved by the PUC at final deliberations set for Dec. 3, the average residential customer will see an increase of $4.66 a month beginning Jan. 1, and small business customers will see an increase of $7.16 a month. Xcel had originally sought a nearly $180 million increase, which would have upped typical residential rates by nearly $5 a month.

This settlement is similar one last summer when Xcel reduced its rate-increase request from nearly $160 million to $112 million, but critics at the time claimed even that amount was too much given the company’s ill-advised investment in coal, which may spike in price if the Obama administration successfully pushes through climate change legislation.

Xcel, however, defends the state-of-the-art Comanche 3 project, which is set to come on line by the end of the year.

“We see this as a significant step to continuing our ability to provide reliable, reasonably priced electric service,” said Tim Taylor, CEO of Public Service Co. of Colorado, an Xcel Energy company. “Comanche 3 is a great investment for customers. Being able to use low-cost coal to provide base-load power is important for our Colorado customers. It also allows us to take the next step and begin retiring some of our older, less efficient coal-fired power plants to continue reducing our carbon dioxide emissions.”

Xcel has also taken heat for trying to pass on questionable travel and entertainment expenses to ratepayers – a move it quickly backpedaled on when consumer groups brought the charges to the attention of the PUC.

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