Xcel Energy unveils new $45 billion spending plan, including $22 billion for Colorado

Xcel Energy plans to spend $45 billion on capital investments over the next five years, including about $22 billion in Colorado, as the utility prepares for what it says will be a significant shift in energy demand.

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

“It’s really driven by a historic shift in energy demand,” Frenzel said. “This is accelerated by the increased risk of extreme weather events and of course the continued acceleration of clean energy adoption across all economic sectors across the 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 electricity to power large data centers through the increasing use of artificial intelligence. Xcel expects a significant portion of its data center customer growth to occur in Colorado.

A portion of the $22 billion that Xcel plans to invest in Colorado from 2025 to 2029 has been considered by the Colorado Public Utilities Commission, including plans to promote the use of renewable energy sources and an upgrade of the state's high-voltage system worth up to to $2 billion.

Colorado's energy demand is expected to double from a peak of about 7,200 megawatts to 14,000 megawatts over the next five years, said Robert Kenney, president of Xcel Energy-Colorado.

Xcel is Colorado's largest energy provider. It supplies electricity to 1.6 million customers and natural gas to 1.5 million customers, although there is overlap between the two groups.

In a proposal filed with the PUC on Oct. 15, Xcel estimates the five-year investment plan will result in rate increases of approximately 2% to 2.5% per year for Colorado customers. “Our goal here is to make necessary investments and keep the bills as affordable as possible,” said Frenzel.

As before, a large part of the money for the investments will be financed from internally generated cash flow, said Frenzel.

“But given the size and scale, we also need to go to market and raise both new debt and new equity to fund this plan in amounts that we have not had to do in the past,” Frenzel added.

Frenzel said Xcel also managed to secure state and federal grants and incentives. The company has received nearly $500 million in grants for clean energy projects and the Energy Department is reviewing an additional $300 million in applications.

In recent years, the Colorado Office of the Utility Consumer Advocate has accused Xcel of burdening customers by “pancaking” rate increase requests and submitting a series of proposals for increases for natural gas and electric service one after the other. A joint legislative committee held hearings in 2023 on why heating bills from Xcel and other Colorado utilities skyrocketed at the start of winter and supported a bill on short- and long-term solutions to keep prices as low as possible hold.

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

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

Overall, the average price residential customers in Colorado 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 ensure that the transition away from fossil fuels “happens at a reasonable price,” Frenzel said. Xcel has added solar and wind projects and is planning more. The utility is installing battery storage to meet government mandates to reduce greenhouse gas emissions and its own goals.

In 2018, Xcel Energy pledged to produce 100% carbon-free electricity by 2050. The company will close all of its coal-fired power plants by the end of 2030% by 2030.

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

In addition to trying to meet the growing call for electrification of transportation and buildings, Xcel is also preparing for increasing demand for data centers that house computers that keep the Internet running. As the use of artificial intelligence increases, there is a push for more and larger facilities.

Frenzel said during Xcel's earnings call that Xcel Energy has “nearly 9,000 megawatts of opportunity in our customer pipeline before 2030” for data center power. The company expects to sign contracts with about a quarter of interested parties over the course of its five-year plan.

Frenzel said in an interview that about half of Xcel's growth in data center customers will likely occur in Colorado, due in part to the state's commitment to cleaner energy on the grid. Other factors include the region's talented workforce and proximity to Denver International Airport, he said.

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

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

Amanda Rome, Xcel's executive vice president, group president of utilities and chief customer officer, said the company will attract new customers in a way that promotes economic development and helps communities.

“But we have to do it in a way that benefits our existing customers. It can’t hurt existing customers,” Rome said. “We know that we will have significantly more requests for data centers than we can handle.”