After years of costly wildfires, the insurance affordability crisis isn’t just hitting Colorado homeowners with huge premium increases. Insurance companies are now significantly raising premiums for Xcel Energy, the state’s largest electric utility.
And the company ultimately wants customers to pay.
Last month, Xcel Energy told the Colorado Public Utilities Commission that its “excess liability insurance” was up nearly 400 percent compared to last year. Xcel Energy estimates in a regulatory filing that it will pay $49 million in premiums this year starting Oct. 18.
The company did not immediately reveal to CPR News the final premium amount or the name of the insurance company.
The company uses its coverage when its employees or equipment are exposed to a catastrophic event, such as a wildfire, that could result in costly property damage or death. Xcel Energy said in a filing that climate change, “unprecedented” wildfire risks and litigation are driving up rates at major Western utilities.
Xcel Energy currently faces at least 300 lawsuits alleging its involvement in starting the Marshall Fire (which the company denies), but the company is blamed for causing Texas’ largest wildfire. It also faces additional lawsuits alleging power equipment.
In a filing, the company told Colorado regulators that the premium increases are an unusual situation, similar to costs incurred during the COVID-19 pandemic. There is. The company wants regulators to track how much it spends on insurance premiums and ultimately bill the state of Colorado for it months or even years later, sometimes with additional interest. I’m thinking of making it.
The Public Utilities Commission will determine, through regular rate case discussions, how much Xcel Energy can charge customers for costs such as insurance and construction of new power plants.
Consumer advocates say Xcel Energy is potentially asking regulators to allow it to charge customers more quickly for their insurance, since rate lawsuits typically only occur every few years.
“The company is seeking prompt recovery of these costs outside of rate litigation,” said Joseph, deputy director of the Colorado Office of Utility Consumer Advocate, an independent state agency that advocates on behalf of utility customers. Pereira said.
“The question is, will the company be able to get some quick action or will it have to wait until the next rate decision to put these funds back into the vault?”
In Pereira’s view, Xcel Energy’s request amounted to an accounting trick. He said utilities should wait until the next rate case to discuss why Coloradans, rather than corporate shareholders, should have to pay premiums.
There are some signs that state regulators are sympathetic to this argument. Dipesh Dipu, a financial analyst with the Public Utilities Commission, recommended that regulators deny Xcel Energy’s request and that the company wait until rates are determined to collect premiums.
“Future rate litigation will do much more to address the issues at hand by providing greater access to and opportunity for review of cost information,” Dipu wrote in response to Xcel Energy’s application. It provides a great platform.”
In a statement emailed to CPR News, a representative for Xcel Energy said maintaining coverage is essential to the company’s business.
“We are tracking and proposing to defer costs associated with excess liability premiums and will not include them in our rates until future rate litigation,” the spokesperson wrote. .
leaning and unstable tower
Xcel Energy’s excess liability insurance is provided by several different companies that pay claims in a specific order. In a regulatory filing, the company likens the way it stacks up insurance policies to a tower.
Xcel Energy uses a “mutual insurance company” on the bottom floor of the tower, which the company says offers the most extensive coverage. In the mid-tier, the company buys insurance from commercial markets in London, the United States and even Bermuda.
The glue holding the towers together is an in-house insurance company set up by Xcel Energy’s parent company to fill the coverage gap.
Since 2014, Xcel Energy has spent tens of millions of dollars on insurance tower payments for its customers. But insurance companies are increasingly turning tower construction into a game of Jenga, prompting Xcel Energy and other utilities to explore more stable options.
Southern California Edison, a California power company, has pooled some of its own money to pay for damages caused by the wildfires. The model is called “self-insured,” and Xcel Energy said in its filing that it is considering self-insurance in the future.
But for now, Xcel Energy says it needs liability insurance to keep customer bills low and ensure investors can stay invested even as costs increase. .
“There is no historical basis for more than tripling premiums,” Stephen P. Berman, vice president of Xcel Energy, said in a regulatory filing.
Will costs go down?
In June 2024, Xcel Energy presented regulators with an extensive plan detailing how it will improve its operations to reduce the likelihood that its power lines and other equipment will start wildfires. Announced.
The company hopes its wildfire safety plan will eventually lead to lower premiums from insurance companies, but there can be no guarantees. But the company doesn’t know when insurance costs will return to historically normal levels, according to the filing.
Mr. Berman, vice president of Xcel Energy, argues that rising insurance costs are “well beyond the control of utilities.”
Todd Logan, an attorney at Edelson PC who is suing Xcel Energy on behalf of hundreds of Marshall Fire survivors, disagrees. He said Excel and other Western power companies are trying to pass on the costs of their alleged negligence through insurance.
“Utilities know they cannot demand rate increases to cover the cost of wrongdoing,” Logan said in an email to CPR News. “Instead, they are cynically trying to postpone the rate hike for a few years, hoping that everything will be swept under the rug before they demand it later.”
Logan’s firm represented more than 1,500 people who sued Oregon utility company PacifiCorp for causing massive fires in 2020. Since then, Pacific Corp’s liability insurance has soared by $96 million.
In 2023, the company asked Oregon regulators to help it track costs so it could ultimately bill customers for insurance costs. In 2024, regulators agreed.
