Colorado law prohibits utilities from spending ratepayer money on politics

A new law in Colorado prohibits investor-owned utility companies from using ratepayer money to fund trade associations, promotional advertising, certain kinds of lobbying, and other political influence activities.

The Colorado Senate voted 23-12 on Monday to pass the Utility Regulation Act, following a House vote of 46-19, and the bill is expected to be signed by Governor Polis. The legislation followed hearings in March by the Joint Select Committee on Rising Utility Rates, which was created by Colorado Senate President Steve Fenberg and House Speaker Julie McCluskie to investigate increased gas and electric utility bills impacting Coloradans.

In addition to new rules prohibiting utilities from using ratepayer money for political spending, the bill includes other ratepayer protections such as directing the Colorado Public Utilities Commission (PUC) to establish rules limiting how much investor-owned utilities can charge ratepayers for lawyers and consultants that argue on behalf of the utility’s efforts to raise rates, phasing out ratepayer subsidies for extending gas pipelines to new construction, and other measures aimed at reducing the risks to ratepayers of methane gas price spikes.

Lobbying disclosure reports show that the legislation faced opposition in the form of a major lobbying effort by investor-owned utilities and trade associations, including Xcel Energy, Atmos Energy, Black Hills Energy, Colorado Natural Gas, Edison Electric Institute, American Petroleum Institute, Colorado Oil and Gas Association, and Colorado Chamber of Commerce.

The bill received support from the AARP, League of Women Voters, BlueGreen Alliance, Colorado Public Interest Research Group, Colorado Communities for Climate Action, Western Resources Advocates, Solar United Neighbors, Sierra Club, Natural Resources Defense Council, Conservation Colorado, City and County of Boulder, and Grand Valley Power, an electric cooperative in Mesa County, Colorado.

Colorado ratepayers will no longer pay for investor-owned utilities’ trade associations

The legislation prohibits investor-owned utilities from charging their ratepayers for “Organization or membership dues, or other contributions, to any organization, association, institution, corporation, or other entity that engages in lobbying or other similar activities intended to influence the outcome of any local, state, or federal legislation, ordinance, resolution, rule, ballot measure, or other regulatory decision.”

That means Colorado ratepayers will no longer be forced to pay for the money that investor-owned utilities send to trade associations like the American Gas Association, Edison Electric Institute, chambers of commerce, and other industry groups.

Currently, investor-owned utilities in Colorado charge ratepayers for most of their payments to trade associations, and only charge shareholders for a relatively small portion of the dues that the trade associations determine were used for lobbying. The American Gas Association, for example, claims that less than 5% of its members’ dues went to lobbying in recent years, even as it spends money on anti-electrification campaigns in Colorado and other states that it doesn’t classify as lobbying.

Investor-owned utilities also will no longer be able to charge their Colorado ratepayers for dues to trade associations that claim they don’t lobby, but that engage in “similar activities” intended to influence policy. For example, Xcel Energy, Atmos Energy, and Black Hills Energy are represented on the board of the Southern Gas Association, yet that trade association is not listed on Xcel Energy’s political/lobbying activity reports, likely because the trade association claims it doesn’t lobby. But the Southern Gas Association engages in activities aimed at influencing policies, such as a “Natural Gas Champions” program that trains gas industry employees to “explain the critical role that natural gas plays in a low carbon future.”

The Southern Gas Association announced in February 2023 that its new board president is an Xcel Energy executive based in Denver.

Investor-owned utilities prohibited from charging Colorado ratepayers for lobbying or other activities to influence legislation

The legislation prohibits investor-owned utilities from charging ratepayers for “Expenses for lobbying or other activities meant to influence the outcome of any local, state, or federal legislation, ordinance, resolution, or ballot measure.”

During a March 14 hearing held by the Joint Select Committee on Rising Utility Rates, executives with Xcel Energy, Atmos Energy, and Black Hills Energy claimed that they already don’t charge ratepayers for lobbying expenses, but did not directly answer questions from Sen. Fenberg and Rep. Matthew Martinez about how they define lobbying.

While the legislation prohibits investor-owned utilities from charging ratepayers for lobbying on legislation, ordinances, resolutions, and ballot measures, it does not similarly restrict those utilities’ efforts to influence rules and regulations, which could allow utilities to continue charging customers for those political expenses.

For example, High Country News reported on how Atmos Energy lobbied aggressively against pro-electrification building code changes in Gunnison, Colorado. Yet Atmos Energy’s annual report to the Colorado PUC for 2022 disclosed only the payments the gas utility made to a single lobbyist, and don’t mention the Atmos Energy employees that pressed Gunnison officials last year to weaken the town’s building codes proposal, suggesting that the company likely charged ratepayers for the campaign because it doesn’t consider it lobbying.

Building codes are rules, not legislation, so Atmos Energy could continue to charge customers for the money it spent on that campaign and other political efforts aimed at influencing rules and regulations.

Investor-owned utilities prohibited from charging Colorado ratepayers for promotional advertising and other political spending

The legislation prohibits utilities from charging ratepayers for “advertising and public relations expenses that do not directly relate to a purpose or program that is required or authorized under statute or commission rule or order.”

Utilities will still be allowed to charge ratepayers for advertising authorized by the Colorado PUC, such as to educate ratepayers about energy efficiency programs, but won’t be able to charge ratepayers for promotional advertising, such as “communications to promote or improve the utility’s brand,” “expenses for the purpose of influencing public opinion about the utility,” or “expenses intended to create good will toward the utility from the general public.”

The legislation also prohibits investor-owned utilities from charging Colorado ratepayers for a variety of other types of spending that primarily benefit the company’s shareholders and board of directors, including: Investor-relation expenses; tax penalties or fines issued against the utility; charitable giving expenses; contributions to political candidates, campaign committees, issue committees, or independent expenditure committees or similar political expenses; travel, lodging, food, and beverage expenses for the utility’s board of directors and officers; entertainment or gift expenses; expenses related to any owned, leased, or chartered aircraft for the utility’s board of directors and officers; and expenses related to marketing and administration or customer service for unregulated products or services provided or sold by the utility or the utility’s affiliates.

In addition, utilities can’t charge ratepayers for “more than fifty percent of annual total compensation or of expense reimbursement for members of the board of directors of the utility.”

Amendments added annual reporting requirement, but weakened penalties

After the bill was introduced last month, it was amended in a variety of ways. One of those amendments strengthened the section of the bill focused on prohibiting investor-owned utilities from charging ratepayers for political costs, by requiring investor-owned utilities to submit detailed reports of their political spending to the Colorado PUC:

“The Commission shall require a utility to file an annual report with the Commission to ensure the utility’s compliance with this section. The report must include the purpose, payee, and amount of any expenses associated with the costs and activities that are not permitted to be recovered from customers pursuant to this section.”

Utility regulators in Arizona have sometimes required utilities to submit detailed reports showing their political spending. However, those reports came in response to requests from individual Commissioners, and so have varied in their level of detail over the years. The Colorado PUC currently requires utilities to include information about their lobbying, advertising, charitable and trade association expenses in annual energy reports, but those reports do not require details about expenses’ purpose and payees, as the Utility Regulation Act does. By requiring annual reporting of utility political spending in statute, the legislation will ensure more consistent detailed disclosure.

In addition to ensuring annual reporting of utility political spending, the amendment also weakened the bill’s original language specifying penalties for utilities that illegally charge their ratepayers for political spending. The original version of the bill stated that if the Colorado PUC determined that a utility illegally charged its ratepayers for lobbying, trade association dues, or other political spending, “the Commission shall assess a nonrecoverable penalty against the utility in an amount that is not less than the total amount of costs improperly recovered.”

The amendment changed “shall” to “may,” and removed the section specifying that the penalty should be at least as large as the amount that the utility charged ratepayers – although the Commission could still choose to penalize utilities at those or other levels.

In addition to penalties, utilities will have to provide refunds to ratepayers for any illegal charges for political spending.

Further Reading

Energy and Policy Institute report: Getting Politics Out of Utility Bills; How policymakers can protect customers from being forced to fund utilities’ political machines

SB23-291: Utility Regulation; Concerning the public utilities commission’s regulation of energy utilities

Colorado Joint Select Committee on Rising Utility Rates hearings

Colorado Public Radio: Xcel’s winter of discontent

Energy and Policy Institute: New bill aims to stop Colorado utilities from spending ratepayer money on politics