The PUC Wednesday essentially re-opened Xcel’s electricity rate case that appeared settled earlier this month, putting it back on the agenda for Tuesday of next week because of unexpected delays in getting the Comanche 3 coal-fired power plant near Pueblo online.

Comanche 3 (Xcel)

As first reported on the Colorado Independent Tuesday, Xcel discovered cracks in boiler tubing that will push the plant’s opening into January and possibly beyond. Comanche 3 was supposed to open this fall, and part of Xcel’s $128.3 million rate increase granted earlier this month was earmarked for the troubled facility.

The PUC will meet at 9 a.m. Tuesday to decide how to handle the rate case, whether to adjust it before it goes into effect Jan. 1, or leave it as is and provide a refund to ratepayers after Comanche 3 goes online. Xcel has proposed cutting its rate increase by 39 percent until Comanche 3 is up and running.

Also on Wednesday, Gene Camp, head of the PUC’s Energy Section, brought up a possible staff complaint alleging excess revenues on the gas side. According to Camp, Xcel’s return on equity (ROE) for 2008 was reported by the company to be 11.99 percent, which they later corrected due to various accounting errors to 11.37 percent.

PUC staff puts that number at 11.78 percent, but Xcel was only granted an ROE rate of 10.25 percent when its last gas rate increase of $32.3 million was approved by the commissioners after a settlement in 2006. Those rates, essentially a 2.5 percent increase, went into effect in July of 2007.

Camp said Xcel has proposed fixing the problem in a rate case “because they plan to file for a rate increase next year because they estimate they will under-earn.” But he added the staff does not favor that resolution.

The PUC commissioners will meet on the gas over-earning issue on Dec. 28. Expect some degree of resistance from environmental and community groups troubled by three Xcel rate increases granted over the last four years and issues such as lavish travel and entertainment expenses initially included in the latest rate increase but later expunged.

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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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(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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