Xcel efficiency rebate program resumes after regulators OK money transfer from 2025 budget

Commercial energy efficiency programs shut down by Xcel Energy after it overspent its 2024 budget are back up and running after a decision by state utility regulators allowing the company to move $34 million from next year’s energy rebate budget to fill the gap.

In July, the Public Service Company of Colorado, an Xcel subsidiary, filed for emergency relief with the Colorado Public Utilities Commission saying that it had spent more than $74 million of its $92.9 million budget for the year and had stopped paying commercial energy efficiency rebates.

The PUC had approved a $78 million residential and commercial demand side management, or DSM, budget with about 20% cushion. The utility was on pace to spend $115.6 million due to business programs exceeding the target budgets by 144%.

The main drivers were bonuses and rebates for energy efficient lighting driven by demand from the “indoor agricultural market,“primarily marijuana grow houses.

The shutdown created turmoil among contractors and vendors, many represented by the Energy Efficiency Business Coalition, a trade group. In comments filed by the coalition one member said it had more than $120,000 in rebates pending and was waiting to submit another $55,000.

Another coalition member explained that it relies on Xcel Energy direct pay programs to cover business operating costs including salaries for the employees performing the services covered by these programs.

“Waiting until 2025 for rebate payment will mean waiting approximately 140 days — this is an enormous financial burden for EEBC members and the DSM industry,” the PUC said in its decision.

An agricultural lighting installer who contacted the Sun said that some contractors use short-term loans to do a project, expecting a quick turnaround in payments, but they have gotten caught holding loans while waiting for rebates. The contractor declined to be identified out of concerns it would hurt his relationship with Xcel Energy.

Xcel Energy told the commission while it has restarted its business and energy management programs it is also doing an audit of the lighting program to better understand its expenses.

The Colorado Energy Office, the Southwest Energy Efficiency Program, SWEEP, and the City and County of Denver all supported providing additional money to Xcel Energy.

With the funds from next year’s budget, Xcel said in a filing that it is “now positioned to significantly mitigate the budgetary overage issues identified in the 2024 budget.”

Patricia Rothwell, the business coalition’s executive director, said in an email that her group is “pleased to see that Xcel Energy restarted nearly all of its electric energy efficiency programs as of Oct. 1, including paying rebates ASAP for efficiency projects completed while the programs were paused.”

Program budget vs. annual budget

Despite the stress caused by the shutdown, the Colorado Office of the Utility Consumer Advocate and the PUC staff opposed an increase in the DSM budget saying it would be rewarding the company’s mismanagement.

Colorado Energy Consumers, which represents big industrial and commercial customers, also argued an emergency infusion of cash would undermine the negotiated and approved budget agreements and cost controls.

“In addressing the budget motion, we are faced with balancing two important, but in some ways conflicting, policy goals,” the PUC said in its initial decision.

“We recognize that interruptions in rebate administration add uncertainty to the market and could make achieving future DSM goals more difficult,” the commission said. “That said, CEC, staff, UCA and others raise another important point that stakeholders must be able to rely on the finality of the commission’s decisions.”

The solution, issued in a final order, was to look at the budget over the full three-year energy efficiency plan from 2024 to 2026  — $280 million in total — and move $34 million to the 2024 budget.

“We note that, given our directive above to maintain payments to vendors in 2024 and maintain the overall budget agreed to in the settlement agreement, Public Service will likely overachieve its savings target in 2024 but will have a reduced chance of meeting its savings targets in 2025 and 2026,” the commission said.

Xcel Energy filed a request for the commission to reconsider the language in order to provide more budget flexibility. 

“If we’re pulling this money forward from an existing year there is a high likelihood of having a shortfall in 2026,” Commissioner Tom Plant said at a September meeting. “But that now gives us at least a little time to give the stakeholders the opportunity to come together and try to come up with some sort of agreed upon solution.”

In its request for reconsideration, Xcel Energy is also seeking to ensure that its future performance bonuses won’t be hurt in 2025 and 2026, by the shift in funds.

“We are happy that they’ve restarted incentives in the short-term,” Justin Brant, SWEEP utility program directors, said in an email, “but definitely still have concerns that we’re taking monies from future years and likely just kicking the can down the road.”