Limited coal supply and current price trends for natural gas mean higher energy bills for Coloradans starting in January, as Xcel Energy seeks adjustments in how much it charges its 1.4 million customers.

The Colorado Public Utilities Commission still needs to approve the price adjustment. If approved, the new rates would start on Jan. 1 and remain in effect for three months.

In a statement, Xcel said it is seeking the price adjustment to “reflect the current commodity price of natural gas and continued limited coal supply for the first quarter of 2023.”

“Customers can anticipate an increase in fuel costs for both natural gas and electric bills,” the company said, noting that natural gas prices also affect electric service because it is used to generate electricity.

“The use of natural gas for electric generation has been higher than normal due to rail issues transporting coal from mines to our power plants,” the company said, adding it is conserving its coal inventory to “ensure reliable system operation through the winter season.”

Customers pay the wholesale cost of natural gas as a “pass through” expense, which means Xcel doesn’t mark up the price and the costs fluctuate with the market price.

No surprise

The price hike is expected. Xcel earlier warned its customers that they face steeper energy bills in the New Year if natural gas prices remain high, as experts anticipate, even after coping with hikes in electricity and natural gas costs exceeding 50% in the last year, not to mention soaring inflation. Global demand for natural gas, caused in part by the Russian war in Ukraine, drove prices up earlier this year, according to an October report from the federal Energy Information Administration.

Under Xcel’s request, electric rates will increase by 4.45% compared to this year’s last quarter. Residential customers who use an average of 593 kilowatt hours (kWh) will see a monthly hike of $3.92. The amount is $6.15 per month for small businesses using 929 kWh.

Meanwhile, the natural gas cost adjustment will translate to an average monthly increase of 2.79% or $3.83 for residential customers when compared to December 2022. Small businesses will see an average monthly hike of 2.92% or $17.38, also when compared to this month.

“We understand how difficult high energy bills can be and are providing a range of energy efficiency programs and saving tips to help customers manage their energy use and keep their bills as low as possible,” Xcel said in a statement. “We also encourage customers to reach out if they’re having trouble paying their bills, so they can be connected to programs or resources that may be able to help.”

Xcel customers actually received a reprieve this month, when the wholesale natural gas prices dropped, leading to lower bills for December than previously predicted.

Natural gas consumption had outpaced production in the first half of 2022, as market dynamics drove strong domestic natural gas demand, the Energy Information Administration earlier said, adding it expected natural gas prices to rise this winter as a result of seasonal demand for natural gas in space heating, which typically peaks in January and February. Higher demand in the Northern Hemisphere for LNG exports will also contribute to increased natural gas prices, the agency said.

Colder temps, more energy

Colder temperature, such as is blanketing Colorado now, often pushes energy prices up.

During winter storm Uri in February 2021, Xcel was forced to buy natural gas at record prices over four days that resulted in the company spending $558 million to keep the lights and heat on.

The Colorado Public Utilities Commission, after an investigation into allegations Xcel mismanaged its system and cost ratepayers millions more than it should have, granted permission for Xcel to charge customers $500 million. It also levied an $8 million fine for not notifying customers of the skyrocketing cost of natural gas so they could reduce their energy usage.

Bill Levis, a consultant for AARP Colorado, earlier said that, in the last year, Xcel has added nearly $69 to the average annual residential customer’s bill, and $62 to small businesses.

These most recent commodity cost adjustments sit atop numerous other rate hikes in the last several years.

Levis said the fees that utilities added to customers’ bills as a result of legislation passed by the Colorado General Assembly and signed by Gov. Jared Polis amounted to a rate hike for ratepayers of more than 6%, plus a $0.50 charge.