Public Service Company of Colorado's Gas and Electric Price Volatility Mitigation Plan Approved

Strategic Insights -

The Colorado Public Utilities Commission has approved Public Service Company of Colorado's (Public Service) Application for a two-year Gas and Electric Price Volatility Mitigation Plan (GPVM Plan) for the heating seasons of 2025-2026 and 2026-2027. The plan aims to reduce the exposure of Public Service's gas and electric customers to significant upward fluctuations in natural gas prices during winter months at a reasonable cost through financial and physical hedging tools.

Key Takeaways:

  • The GPVM Plan sets an annual fixed budget for both Gas and Electric operations, replacing the historical method of flexible budgeting within broader frameworks.
  • The plan establishes specific hedging volume targets and proposes the use of physical fixed-price contracts, financial instruments, and natural gas storage to mitigate price volatility.
  • Public Service conducted a Monte Carlo simulation to model potential natural gas price swings during the proposed heating seasons, providing a data-driven foundation for its proposed hedging volumes and financial strategies.
  • The plan includes proposed modifications to conservation messaging triggers to reduce unnecessary notifications and improve the effectiveness of conservation signals during significant price spikes.
  • The Company requests continuation of its "Long-Term Strategy" that authorizes the Company to implement financial hedging to cover up to 25 percent of seasonal gas requirements for five years beyond the upcoming season.
  • Public Service is authorized to recover costs associated with the GPVM Plan through established mechanisms, specifically the Gas Cost Adjustment (GCA) and Electric Cost Adjustment (ECA) riders.
  • Annual reporting shall continue under the Gas Purchase and Deferred Balance Report filed annually on October 1st.

Statistics:

  • The GPVM Plan covers two consecutive heating seasons: July 1, 2025, through June 30, 2026, and July 1, 2026, through June 30, 2027.
  • Annual fixed budget for both Gas and Electric operations: Replace the historical method of flexible budgeting within broader frameworks.
  • Hedging volume targets: Propose the use of physical fixed-price contracts, financial instruments, and natural gas storage to mitigate price volatility.
  • Cost recovery mechanism: Public Service is authorized to recover costs associated with the GPVM Plan through established mechanisms, specifically the Gas Cost Adjustment (GCA) and Electric Cost Adjustment (ECA) riders.

Sources:

  • Decision No. C25-0009 of the Colorado Public Utilities Commission, Jan. 14, 2025
  • Commission Rule of Practice and Procedure 1303, 4 Code of Colorado Regulations ("CCR") 723-1, Rule 4002 of the Rules Regulating Gas Utilities 4 CCR 723-4 and Rules Regulating Electric Utilities, 4 CCR 723-3