Xcel Energy announces $45B investment plan, with about half for Colorado

Xcel Energy plans to spend $45 billion on capital investments in the next five years with about $22 billion of that to be spent in Colorado as the utility prepares for what it calls a significant shift in energy demand.

Bob Frenzel, chairman, president and CEO of the Minneapolis-based company, announced the investment plan during an earnings call Thursday. He told The Denver Post that this is the largest capital plan Xcel has ever released and that it reflects the “critical juncture that our company’s energy grid is sitting at.”

“It’s really precipitated by a historic shift in energy demand,” Frenzel said. “It’s precipitated by elevated risks of extreme weather events and of course the continuing acceleration of clean energy adoption in all sectors of the economy across the entire country.”

Frenzel said the need for more capacity on the grid is being driven by the continued electrification of homes, businesses and transportation as well as the booming demand for more power to run large computing centers as the use of artificial intelligence increases. Xcel expects a substantial portion of the growth in its data-center customers to be in Colorado.

Some of the $22 billion that Xcel foresees investing in Colorado from 2025 through 2029 has been considered by the Colorado Public Utilities Commission, including plans to boost the use of renewable energy sources and an upgrade of the state’s high-voltage system for up to $2 billion. 

Energy demand in Colorado is anticipated to double in the next five years from a peak of approximately 7,200 megawatts to 14,000 megawatts, said Robert Kenney, Xcel Energy-Colorado president.

Xcel is Colorado’s largest electric utility. It provides electricity to 1.6 million customers and natural gas to 1.5 million customers, with overlaps between the two groups.

In a proposal filed Oct. 15 with the PUC, Xcel projects that the five-year investment plan will result in rate increases of about 2% to 2.5% a year for Colorado customers. “Our goal here is to do investments that are needed and to keep bills as affordable as possible,” Frenzel said.

As in the past, much of the money for the investments will be financed by internally generated cash flow, Frenzel said.

“But given the size and the scale of it, we also have to go out to the market and raise both new debt and new equity capital to fund this plan in amounts that we haven’t had to do in the past before,” Frenzel added.

Xcel has also been able to secure state and federal grants and incentives, Frenzel said. The company has received almost $500 million in grants for clean-energy projects and the Department of Energy is reviewing another $300 million in requests.

Over the past few years, the Colorado Office of the Utility Consumer Advocate has accused Xcel of burdening customers by “pancaking” rate increase requests, submitting a series of proposed hikes for natural gas and electricity service in a row. A joint legislative committee held hearings in 2023 on why heat bills from Xcel and other Colorado utilities shot up dramatically at the start of the winter and sponsored a bill on short- and long-term solutions for keeping prices as low as possible.

Colder weather and high wholesale natural gas prices drove much of the increases that doubled or tripled bills. However, customers and advocates also criticized recent rate increases.

Frenzel said Xcel energy bills in Colorado are below the national average. “But I’m often told when I talk to people that they don’t pay the national average, they pay their own bills, and any increase from today is a challenge. And we understand that.”

Overall, the average rate that Colorado residential customers paid for electricity in August was 15.65 cents per kilowatt-hour, according to the U.S. Energy Information Administration. The national average was 16.63 per kilowatt-hour.

Xcel’s goal is to make sure the transition from fossil fuels “comes at a reasonable price,” Frenzel said. Xcel has added solar and wind projects and plans more. The utility is installing battery storage to meet state mandates for cutting greenhouse gas emissions as well as its own goals.

In 2018, Xcel Energy pledged to produce 100% carbon-free electricity by 2050. The company will close all its coal-fired power plants by the end of 2030. It expects to meet or exceed the target of reducing emissions from 2005 levels by 80% by 2030.

Kenney said adding wind power to Xcel’s system saved customers about $700 million in fuel costs over the last five years.

Besides trying to meet the rising call for electrifying transportation and buildings, Xcel is preparing to meet an escalating demand for data centers, which house computers that keep the internet running. There’s a push for more and larger facilities as the use of artificial intelligence picks up.

Frenzel said during Xcel’s earnings call that Xcel Energy has “nearly 9,000 megawatts of opportunities in our customer pipeline before 2030” for powering data centers. The company expects to sign contracts with roughly a quarter of the prospects during its five-year plan.

Frenzel said in an interview that about half of Xcel’s growth in data-center customers is likely to occur in Colorado in part because of the state’s commitment to cleaner energy on the electric grid. The area’s talented workforce and proximity to Denver International Airport are other factors, he said.

Concerns about the amounts of electricity and water for cooling that data centers require raised concerns among Denver City Council members who were considering incentives for a new facility in the Elyria-Swansea neighborhood. One member said she worried about the potential impact on existing customers because of recent power outages in her district.

CoreSite, the company building the data center, has withdrawn its request for a $9 million tax break from the city.

Amanda Rome, an Xcel executive vice president who is group president of utilities and the chief customer officer, said the company will bring on new customers in a way that encourages economic development and helps communities.

“But we have to do it in a way that ensures benefits to our existing customers. It can’t harm existing customers,” Rome said. “What we know is that we’re going to have significantly more requests for data centers than we can accommodate.”