Colorado’s Proposed Rate Hike Is a Warning for Every Regulated Market
If you live in Colorado, or anywhere with a regulated utility market, you’ve probably noticed your utility bill is creeping higher every year.
So here locally, eyes are rolling now that Xcel Energy just asked for another 10 percent rate increase that would move the average bill from about $100 to $110 a month next year.
And it’s not just Xcel. Utilities across the country are filing rate hikes faster than regulators can read them. The system is doing exactly what it was designed to do, and our national energy policy is making it more expensive to run.
Public-Private Partnerships: What Are They and How Do They Work?
If you’re like me, you are probably wondering how a company like Xcel can raise rates and make billions in profits at the same time.
Enter the “public-private partnership,” which is another term for a regulated monopoly.
Here’s how it works in Colorado:
- Xcel builds and maintains power plants, transmission lines, substations, and other infrastructure. The Colorado Public Utilities Commission allows Xcel to recover those investments plus a guaranteed return, called Return on Equity or ROE.
- When Xcel invests in new infrastructure, it effectively increases its rate base, which is the pool of costs that can be charged to customers. Because it’s a monopoly, you don’t have a competing option. Rates are set through hearings, not market competition.
So if you invest in infrastructure and win regulatory approval to recoup the investment (thus earning your allowed return), you’re playing the game as it was designed . That’s the “private” part of the partnership, and for us, the ratepayer, we fund it.
Why Rates Are Rising
Here’s what’s driving rate increase in CO:
- New Infrastructure and Grid Resiliency: Since 2022, Xcel says it has replaced about 17,771 wooden poles, 17,854 transformers, added five new substations, and replaced hundreds of miles of distribution cable. (Denver7 News) Big capital spending means a bigger rate base, which means higher bills.
- Wildfire Liability, Insurance, and Risk Costs: The utility has asked to recover roughly $356 million for past investments and expenses tied to wildfire liability insurance and other risk mitigation. (Colorado Public Radio) These aren’t optional, but they still get added to our bill.
- Electrification and Load Growth: More EVs. More buildings moving off gas. More demand. More infrastructure needed. Xcel frames much of this investment as preparing for building and transportation electrification. (Denver7 News) We’re paying now for what society expects later.
- Regulator-Permitted Return on Capital: That ROE mentioned earlier is baked into the rate case. Xcel’s filings say about 9.8% of the requested increase is its return on equity. (Colorado Public Radio) The company earns when it invests. We pay when it earns.
Combine heavy investment, risk costs, and guaranteed returns, and the math is simple. Rates go up. Once again, this is exactly how this is designed to work.
The Bigger National Issue: Paying for Two Systems at Once
But there’s more at play here pushing energy rates up.
The Ghost of Christmas Future - Renewables
Nationwide, as Forbes wrote last week, electricity prices are also climbing because we’re now funding both the clean-energy future in some arenas, and the fossil-fuel past in others.
Modern renewable economics are proving that clean energy can be cheaper than fossil fuels. The latest Lazard report shows wind and solar generating electricity at $24 to $75 per megawatt hour, often less than natural gas or coal.
Nowhere is that clearer than in Texas. According to the U.S. Energy Information Administration, Texas gets about 30% of its power from wind and solar, more than any other state.
Coal, once over a third of Texas generation, has fallen to around 12%. That shift didn’t happen because Texas suddenly went green. It happened because renewables became the best financial option: faster to build, cheaper to operate, and less volatile than fuel-based plants. Landowners earn lease income, counties collect new tax revenue, and utilities enjoy stable generation costs.
The Ghost of Christmas Past - Fossil Fuels
At the same time, the current administration is reviving older, dirtier generation assets that no longer compete economically, ordering plants that were already or are soon to be decommissioned to stay open. The problem is, recommissioning or building new fossil fuel plants is more expensive than it used to be – 71% more for new gas fired plants than it was four years ago due to supply chain and rising gas turbine costs.
That means utilities are now maintaining aging infrastructure while building a new system on top of it. In regulated markets, those overlapping costs don’t disappear. They flow straight through to ratepayers.
Add in AI-driven demand growth, wildfire insurance, and general inflation, and rate cases like Xcel’s start to make a lot more sense, even if they still sting.
Why This Matters to Enterprises
If you run IT infrastructure, telecom, data centers, or retail operations, you’re not just seeing higher household bills. You’re watching operating costs rise.
Utility expenses eat into margins. They scale with energy demand and rate-base inflation, compounded by regulatory pass-throughs and tariff shifts.
When rates spike, budgets fall apart. Without visibility, utility inflation becomes a hidden tax that quietly drains profitability. You didn’t create the problem, but you’re the one paying for it.
Take Back Control
At AMI Strategies, we help enterprises stop absorbing utility inflation and start managing it. You don’t need to be an expert, but you can certainly borrow one of ours if you need one 🙂
Whatever path you choose, here’s our recommended playbook:
- Get Your Data Right: Dig into your invoices to uncover misallocations, wrong rate classes, and unnoticed riders. When tariffs rise, even small billing errors multiply fast.
- Defend Every Dollar: Optimize your rate class, load profile, and demand-charge strategy, applying time-of-use or demand-response where it makes sense. Programmatically audit every pass-through and surcharge to ensure you’re paying what’s fair, not what’s easy for the utility.
- Make Costs Transparent: Build benchmarking, showback, and chargeback tools that reveal the truth: what part of your bill is usage, and what part is rate. That clarity helps finance and ops make smarter decisions in real time.
- Fund the Fix: Model ROI for efficiency upgrades, on-site generation, or storage so you can decide whether to pay the hike or invest your way out of it.
- Close the Loop: Monitor rate filings like Xcel’s and deliver quarterly impact reports so your finance team isn’t blindsided.
In short, you can turn utility costs from an unpredictable overhead into a predictable, measurable part of your strategy. You can build this capability yourself, or get one off-the-shelf from a company like AMI Strategies.
The Bottom Line
Colorado’s rate recent rate hike requests sparked my curiosity to learn how regulated markets work. The answer is simple: when investment rises, so do costs.
But when you add in federal policy that funds both the past and the future at the same time, the present can get a lot more expensive, and not the kind you want to put under your tree.
But unless you plan on participating in government yourself, a good move is to treat utility expense like a strategy, not a surprise. Get your data right. Defend every dollar. Make every kilowatt accountable.
Because whether you’re impacted by the Ghosts of Christmas Future (cleaner, smarter energy), or still paying for the Ghosts of Christmas Past (fossil fuels and old infrastructure), AMI has you covered.
We help make sure every decision you make about energy and expense management is guided by logic, visibility, and financial sense… not ghosts, guesswork, or bah-humbug rate hikes.
