Energy crunch slams Cheyenne

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From the April 27, 2001 print edition

Energy crunch slams Cheyenne

Xcel seeks regulatory OK to double electricity rates Cathy Proctor Business Journal Staff Reporter Xcel Energy Inc.'s subsidiary in Cheyenne, Wyo., is losing $6 million to $9 million a month buying electricity at prices about triple what its customers are paying the company for energy.

It's the same situation that led California's largest power companies to rack up billions of dollars in debt and push one of them into bankruptcy.

Xcel's subsidiary, Cheyenne Light, Fuel and Power Co., has asked Wyoming regulators to allow it to double its electricity rates to cover the higher cost of energy.

The request has sparked opposition from both Cheyenne's mayor and Wyoming's governor, as well as angering many of the company's 36,600 customers.

"My phone has rung off the hook," Cheyenne Mayor Jack Spiker said. "Every day there's a letter or two in the newspaper about this. There's been a lot more on this than anything else."

Cheyenne Light is proposing a five-year plan that assumes electricity prices will drop in coming years, but that would keep Cheyenne customers' rates at higher levels so the company could recoup money it had already spent.

A decision on the proposed rate increase isn't expected before the end of May; hearings start May 16.

Wyoming regulators already have turned down Xcel's request to give it part of the entire $36 million increase before the formal hearing is held.

The city of Cheyenne formally opposed the rate increase, the first time the city has become involved in utility regulation, Spiker said.

"We're kind of on a roll economically, and I was concerned about new businesses moving into the community and how existing businesses would cope," Spiker said.

In the last few months, Cheyenne has announced 1,000 new jobs moving to the city, plus a $60 million regional distribution center being built by Lowe's Home Improvement Warehouse.

On the down side, Spiker said, another company has indicated it won't make an $80 million investment in its Cheyenne facility if electricity rates double.

Wyoming Gov. Jim Geringer wondered at a March press conference how electricity rates could be going so high in the capital of a state that is "the energy bread basket of the U.S."

Unlike Xcel's Colorado subsidiary, Public Service Company of Colorado, the Wyoming company doesn't have its own power generating plants. For 37 years Cheyenne Light bought all the power it needed from PacifiCorp., based in Portland, Ore.

But the series of renewed and extended contracts ran out at midnight Feb. 24, forcing Cheyenne Light to buy power on the open market after it refused to pay prices PacifiCorp. wanted to charge.

The situation, and what parent company Xcel Energy is or isn't doing to fix it, has many people asking questions. Xcel serves natural gas and electricity customers in 12 states, including Colorado. It has 3 million electricity customers and 1.5 million natural gas customers.

Xcel (NYSE: XEL) reported on April 25 that first-quarter earnings were up 36 percent to 61 cents per share, compared with 45 cents per share during last year's first quarter. Utility earnings for the first quarter of 2001 were 56 cents per share, compared with 39 cents per share for the first quarter 2000.

"We're not opposed to the hike, we're trying to find out why it's so high," said Julie Edwards, chief financial officer for Frontier Oil Corp., the Houston-based parent company of a refinery in Cheyenne.

If Cheyenne Light's rate request is approved, Frontier's power bills for the refinery are expected to double to half a million dollars a month, Edwards said. The increase would be passed on to the refinery's customers, who might decide it's cheaper to buy from Frontier's competition, two refineries in Commerce City that happen to be linked to PSCo.'s power grid, she said.

PSCo.'s electricity rates are frozen for another 18 months or so due to an agreement with Colorado's utility regulators.

"We're suspicious of the fact that Cheyenne is getting hit with a big rate hike and others aren't," Edwards said.

"If it's fair, we'll pay it," she said. "We recognize that power rates are going up all across the nation. But if it's not fair, we don't want to pay it, or more than our fair share."

Xcel is working to soften the impact of higher energy prices, Cheyenne Light president Rick Kaysen said.

Cheyenne Light has signed an agreement with sister-subsidiary PSCo. to buy power at below-market rates until the end of the year, he said.

Xcel also offered Cheyenne Light an intra-company loan of $100 million to buy power; the loan is part of the rate case Wyoming regulators are reviewing. The parent company also has signed off on the five-year plan to recoup its costs.

"Xcel is trying to work with an affiliate," Kaysen said.

Copyright 2001 American City Business Journals Inc.

http://denver.bcentral.com/denver/stories/2001/04/30/story1.html?t=printable



-- Martin Thompson (mthom1927@aol.com), April 30, 2001


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