Flyers for the event aptly read, “The [bill] spike is driven by gas prices—but utilities are continuing to invest in expensive new gas infrastructure, all the while knowing it’s causing our families’ bills to be a mile high!”
The frustration is well grounded. For many Colorado customers, gas bills more than doubled this winter compared to the last. Meanwhile, Xcel Energy requested more than $200 million in gas rate increases in 2022—and raked in record-high profits of $1.74 billion.
Rally-goers are urging the state to take a stand against high gas prices by reducing Colorado’s dependence on “natural” gas, a fossil fuel that is bad for our wallets, our climate, and our health. The legislature can take action this year by cutting costly, unnecessary investments into the gas system.
New gas investment is a bad deal
Investing in gas infrastructure, such as pipelines, is the gas utilities’ core business model: They pass the cost of the investment, plus a return on investment, on to their captive customers. As Colorado Public Radio notes, “Continued [gas] expansion projects are one reason [Xcel Energy] earned a record $1.74 billion in profits last year.”
Unfortunately, investing in gas infrastructure today is a bad deal for customers.
When a gas utility makes an investment, it expects to recover the cost from customers—plus a profit—over a span of up to eight decades. Yet scientists overwhelmingly agree that we need to eliminate gas use in buildings in fewer than three decades to avoid the worst impacts of climate change.
Luckily, modern all-electric appliances can deliver efficient, affordable, and reliable heat to our homes without the emissions. The transition to all-electric buildings in Colorado is already underway and will bring numerous co-benefits: cleaner, healthier air; environmental justice; and independence from the political and price volatility of oil and gas.
But it also means the state’s energy system will look markedly different in three decades—and our investments need to change accordingly.
The legislature must act now
Gas utilities are facing an existential challenge to their business model. The future is all-electric, and continued, unchecked gas system spending will have devastating consequences for customers who stay on the gas system the longest.
Without intervention, it will be the customers who are least able to transition to all-electric appliances, including lower-income Black and Brown people and rural households, who are left paying for these bad investments. To avoid this outcome, Colorado must act now to mitigate unnecessary, costly gas investments.
The legislature should pursue the following no-regrets policies to save gas customers money, today and decades into the future:
1. Eliminate subsidies to connect new properties to the gas system.
Currently, building developers seeking to connect a property to the gas system receive a subsidy—aka a “gas line extension allowance”—to cover the cost. The subsidy is paid for by all other gas customers, including low-income customers, regardless of whether they ever benefit from a new connection themselves. The legislature should remove these incentives to build with gas, which are outdated, expensive, and incompatible with our climate goals.
2. Disallow utilities using ratepayer money for pro-gas campaigns.
Gas customer money shouldn’t fund the utilities’ dirty work. Yet recent investigations into Xcel Energy found that the utility may have done just that, donating $80,000 in 2022 to a pro-gas front group called Coloradans for Energy Access. The group has a stated goal of battling building electrification, and its founding board members include executives from Xcel, Black Hills Energy, and Atmos Energy, which is the nation’s largest gas-only utility. The legislature should make it clear this year that ratepayer money cannot be used to campaign for gas utility interests.
3. Redirect ratepayer-backed incentives for gas appliances.
State energy efficiency programs, which are paid for by utility customers, currently offer rebates and discounts for customers to purchase gas appliances—contradicting state and federal building electrification policies and goals. Colorado should redirect this funding to efficiency measures that will save customers money long into the future, including building envelope, duct efficiency, and electrification measures, with a focus on low-income customers.
4. Strengthen long-term gas planning requirements.
To achieve a managed transition, Colorado must establish a long-term process for decommissioning gas infrastructure as households switch to all-electric appliances.
As a starting point, state regulators must scrutinize proposed gas system investments and avoid reinvesting into the gas system where possible—for example, retiring a pipeline and electrifying the affected community where it is cost-effective. The state should also prioritize electrifying low-income households early on, so that they are not stranded with high gas system costs as other, better-resourced households depart the system.
Colorado’s Clean Heat process, which requires the state’s gas utilities to meet decarbonization targets with a least-cost mix of resources, provides an initial road map for the transition—yet the state can go further by requiring all gas utilities to consider building electrification as an alternative to gas infrastructure investment.