The Minnesota-based, investor-owned utility – Colorado’s largest power supplier – had originally sought a $180 million increase, which was whittled down to nearly $136 million in a settlement with two consumer groups.

The PUC – the appointed state board with regulatory authority over Xcel (Public Service Company of Colorado) – estimates the increase will raise the average residential electricity bill by 6.5 percent, or about $4.43 a month. Just last summer the PUC granted Xcel a $112 million rate increase

“No one likes a rate increase,” PUC Chairman Ron Binz said in a release. “But we scrubbed Xcel’s request thoroughly and believe that the reduced amount is fair.”

The increase was granted to help Xcel cover the costs of building a third generating unit at the Comanche coal-fired plant in Pueblo (Comanche 3) – which is slated to come online by the end of the year — 300 megawatts of new natural gas-fired generation at the Fort St. Vrain station near Platteville, investment in the SmartGridCity project in Boulder, and other power distribution upgrades.

Not in the final rate increase were controversial travel and entertainment expenses totaling more the $120,000 that Xcel quickly pulled from the rate case when consumer activists brought them to the attention of the PUC several weeks ago.

“In the next rate case, I would expect Xcel to do a statement that said they have scrubbed their books of these kinds of expenses,” commissioner James Tarpey said a final deliberation hearing Thursday, referring to thousands of dollars in lavish board dinners and executive retreats Xcel tried to pass on to rate payers when it first requested a nearly $180 million rate increase.

The company quickly pulled the T&E expenses from the rate case and trimmed nearly $44 million from its increase request as part of a settlement with two consumer groups. But the Colorado Attorney General’s Office, filing on behalf of the Office of Consumer Counsel, said $33 million ought to cover Xcel’s recent investments – a more than $100 million discrepancy.

Consumer and clean energy advocates were pushing for a firm rule-making by the PUC on the issue of T&E expenses and other perks, but the commissioners on Thursday made it clear they would not go that route, instead opting to admonish Xcel on the record and make it clear they did not expect to see such expenses in future rate cases.

“It was a polite but powerful statement from the commissioner,” Clean Energy Action’s Leslie Glustrom said of Tarpey’s comments. Glustrom was one of 30 interveners in the rate case, and helped bring the T&E expenses to the attention of the PUC.

“Your stories really clearly had an impact on this whole wining and dining and the perk issue,” Glustrom said of ongoing Colorado Independent coverage. “[You] pointed out that there may not be a ruling, and so the commissioners all really spoke to that and said, ‘We’re not going to do a ruling, but we really question whether this is appropriate.’”

Dennis Kelly, another intervener in the rate case and the attorney for a community activist group called the ArapaHope Community Team, was dubious how effective a public admonishment will be without a firm policy on T&E expenses going forward.

“The [PUC] refused to initiate a proceeding to establish guidelines for T&E expenses that could be included in the cost of service,” Kelly said. “The [PUC's] rationale was that it had audit authority. Of course, the problem there is that when we asked to [PUC] to look into this matter, they indicated that they did not have the resources to audit [Xcel].”

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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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Most of that would cover the new Comanche 3 coal-fired power plant near Pueblo, but, initially at least, some of it was targeted to cover lavish board dinners and luxury spa retreats. These protests might not have been so polite had that information been a more widely disseminated last spring.

Xcel protest, Denver, 3/11/2009 (Photo: Doug Grinbergs)

That’s the difference between Coloradans and, say, New Yorkers, who are always claiming we’re too damned mellow. Compare and contrast, for instance, a Glenwood Springs hearing on natural gas drilling Monday and a similar “meeting” in New York City the next day.

According to ProPublica, “it didn’t take long for a New York City public hearing on natural gas drilling to descend into near chaos. Just seconds after the first speaker took the microphone at the Department of Environmental Conservation’s hearing, a man in a suit and tie jumped onto the stage and yelled, ‘We want a statewide ban! The gas drilling is dangerous!’”

Ah, to be in a New York state of mind.

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(Photo by Blude; cc Flikr)

In an exhibit filed with the Colorado Public Utilities Commission on the last day of a rate-case hearing in Denver last week — in which Xcel sought nearly a $180 million rate hike — the state’s largest power provider detailed expenses totaling more than $120,000 that it hoped to pass on to its 1.3 million Colorado customers.

Some of those 2008 travel and entertainment expenses include $9,524 of a $41,890 bill for a board retreat at the plush St. Julien Hotel and Spa in Boulder; $5,410 of a $9,721 bill for Colorado Avalanche games; $19,323 of a $26,639 bill for “other employee related sporting activity”; $3,746 of an $11,958 tab at McCormick’s Fish House and Bar in Denver; and $3,458 of a staggering $15,211 bill at Frasca restaurant in Boulder.

Dennis Kelly, an attorney in Arapahoe County representing a grassroots activist group called the ArapaHOPE Community Team, tried late last month to introduce testimony from the Minnesota attorney general in a similar rate case in May for Xcel subsidiary Northern States Power Company before the Minnesota Public Utilities Commission.

Kelly said the Colorado PUC — which is in charge of state oversight of the Minneapolis-based, investor-owned utility — refused to enter the testimony from the Minnesota case into the Colorado docket but did request information from Xcel detailing whether there were similar expenses being passed on to Colorado ratepayers.

“I have no problem with travel and entertainment expenses as long as they’re reasonable and justified, but some of these go beyond the pale of what’s reasonable and what’s justified,” Kelly said. “It just seems like an awful lot of money for the ratepayers to be paying for. If the company wants to do it, that’s fine, but it should be the shareholders, not the ratepayers.”

In the Minnesota case, Xcel reportedly axed $3.9 million from its rate increase request of $156 million after Minnesota Attorney General Lori Swanson questioned how a number of expenses being passed on to ratepayers had anything to do with providing power.

“Xcel has charged Minnesota electric ratepayers — and likely Minnesota gas ratepayers — for expenses that are not reasonable or necessary for the provision of electric services,” the OAG’s office concluded. “The OAG believes it would be beneficial for the Minnesota Public Utilities Commission to order a complete review of these expenses …”

Kelly and other “interveners” in Xcel’s Public Service Company (PSCo) rate case want the Colorado PUC to set strict guidelines for such expenses in the future. They say the PUC apparently does not have any such parameters for T&E expenses. Matt Baker, one of three PUC members, said Monday he could not comment on an open docket.

“That is an active issue in the rate case, so I can’t talk about it, but it has been brought up,” Baker confirmed. Xcel’s second rate case in the last year – it received a $112 million increase just last summer – should be decided in the next two weeks after all the parties submit position statements.

In a statement issued Tuesday afternoon by Xcel in response to inquiries from The Colorado Independent, a spokesman for the utility called the expenses “a reasonable cost of doing business” and said the company has offered to remove them.

“In response to the issue raised by parties in the case, PSCo [Xcel] performed a detailed analysis to see the amount of these types of expenditures included in its historic test year. The number was small — $121,000, which is .004 percent of customer bills,” spokesman Tom Henley wrote in an e-mail.

“The commission has never disallowed these sorts of expenditures in the past and the company finds that these occasional expenses are a reasonable cost of business, but offered to remove the costs from its historic test year during the hearings. The company will offer to remove the same amount from its forecasted test year, meaning that customers in Colorado will not be paying for these types of expenses.”

Kelly said that at the very least the PUC should establish a rule barring alcohol costs from being passed on to ratepayers.

“These people have no sense of propriety given the current situation in our country, but they need to ask themselves if they really need all of this that they’re asking for,” Kelly said. Leslie Glustrom of Boulder-based Clean Energy Action, another intervener in the rate case, seconded that sentiment.

“In this particular case, if those expenses go into the rate base, the message it sends is the more you drink, the more you earn,” Glustrom said. “The commission can set a clear policy of, ‘Go ahead, make your deals over wine and dinner if you want, but don’t charge it to ratepayers.’ If they want to do that, let their shareholders pay for it.”

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