URL: http://www.denver-rmn.com/business/1223rate1.shtml

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Gas bills could jump 40% Xcel asks regulators for 3rd rate hike since June

By Jeff Smith Denver Rocky Mountain News Staff Writer

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Colorado residents' natural gas bills will rise another 40 percent if regulators approve Xcel Energy's latest rate-increase request, the utility's third since late June.

Xcel, formerly Public Service Company of Colorado, on Friday asked for an additional $361.6 million to cover increases in prices charged by its gas suppliers. It is the largest rate-increase request ever in Colorado and brings the total in rate-hike requests to more than $600 million over the past seven months.

If the latest request is approved by the Colorado Public Utilities Commission, Xcel says the typical residential natural gas bill would increase to $141.92 in January — compared with an average of $72.56 in January 2000. A harsh winter could send utility bills even higher compared with last winter, when temperatures were relatively mild.

Already, many consumers have seen sticker shock with their bills for this November, which was the second-coldest on record in Colorado. And natural-gas costs are only part of the typical utility bill, since those costs are on top of the cost of electricity.

"The extremely high cost of natural gas is quickly becoming something of a national crisis," said Cynthia Evans, vice president of Xcel Energy for Colorado, Wyoming and Arizona. "Never has the cost of natural gas risen so quickly and dramatically."

Xcel and other utilities buy much of their natural gas based on short-term contracts tied to market indexes, which have been subject to dramatic price increases this year. Natural gas prices hit nearly $10 per million British thermal units this week, double the prices of three months ago when Xcel made its second rate request. In late 1998 and 1999, prices ranged from about $2 to $3 per million Btu.

Price increases have been caused in large part by record low gas inventories going into the fall, and now colder than normal weather in much of the country. In addition, natural gas has become the primary fuel in recent years for electricity generation, and electricity demand has increased because of the Internet and a growing economy. Yet since the mid-1980s, the number of oil and gas rigs operating in the United States has dropped from roughly 4,000 to just more than 1,000.

"At present there is an adequate supply of natural gas, but the cost is having severe impacts on all customers and on the economy at large," Evans said.

Ken Reif, the director of Colorado's Office of Consumer Counsel, called Friday's rate request unprecedented and predicted severe consequences for consumers. Utilities generally ask for gas cost adjustments only once a year.

"There's never been anything like it (in Colorado)," Reif said. "It's going to be tough on a lot of people this winter. We're very concerned about the impact it will have, particularly on low-income people."

Tens of thousands of Coloradans already have applied for assistance to pay their utility bills. Glenn Cooper, program manager of the state's Low-Income Energy Assistance Program, said last week that he expected demand to jump in light of further increases.

Reif said the only grounds to challenge the increase would be if there was evidence the utility did something wrong, which he said he doesn't have. But Reif said he thinks Xcel's request highlights the need to consider changing the system in which gas costs are recovered, such as encouraging or requiring utilities to sign longer-term, fixed-price contracts.

Evans said Xcel hopes this will be the last request of the winter season, but can't make any guarantees.

"This filing is based on what we think it (the market) looks like right now," she said. "It is based on forecasts as well as amounts so far that are under-recovered."

She noted that the last time Xcel entered into long-term contracts, consumers were unhappy when they saw gas prices go down but their bills didn't.

"So now we're in short-term contracts (tied to market indexes). There probably isn't a magic answer ... I don't know if this calls for a change."

Colorado is in better shape than many other states. Reif noted that natural gas prices historically have been lower here than in most other areas because of proximity to gas wells.

"We have very low natural gas prices generally speaking with the rest of the country because the sources we draw on are located in the Rocky Mountain area and we just have to transport it a little way," Reif said. "But we're all suffering across the country."

The Low-Income Energy Assistance Program, the Colorado Energy Assistance Foundation and Xcel Energy are scheduled to launch a public-awareness campaign next week to notify Colorado residents that financial assistance is available to pay their energy bills. The campaign will target low-income neighborhoods and ads will run on billboards, bus benches and television and in supermarket pharmacies, Cooper said.

The PUC, utilities and the assistance programs have repeatedly suggested that consumers look at ways to conserve energy and use it more efficiently by turning down thermostats, improving insulation, eliminating drafts and requesting energy audits. Consumers also are encouraged to sign up for budget payment plans, in which monthly utility payments are evenly spread over the year.

Those who need help paying their bills should call LEAP at (800) 782-0721 or the Colorado Energy Assistance Foundation at (303) 825-8750 to see if they qualify for assistance.

-- Martin Thompson (mthom1927@aol.com), December 23, 2000