As the two smallest of the private-sector energy utilities in Colorado, Kinder Morgan and Aquila are drawing a line in the Rocky Mountain clay soil with the state regulatory commission staff’s proposal to change the rules on how and what the electric and natural gas distributors must do to determine allocation of their costs. The two energy suppliers argue that the proposal will result in long, costly litigation fights among the companies, Public Utilities Commission (PUC) staff and customers.

A final hearing was held last week on what is part of a multi-year effort by the Colorado PUC to revise all of its rules and procedures for all of the industries it regulates. An administrative law judge’s decision is expected before the end of April. Cost allocation methodology is one of the areas being looked at, according to a PUC spokesperson.

Kinder Morgan earlier in the month protested a Colorado PUC staff proposal for new filing requirements for utilities regarding what the regulators call the “cost assignment and allocation mechanisms” (CAAM). Under the proposed new rules, a utility would have to file a major cost-allocation study every time it tried to make any changes, no matter how small, in its rates.

The two companies are arguing that the proposed changes would not benefit customers or the regulatory commission as they, and the ultimate monetary impact of the new requirements, would not be fully known for another year. They further argue that they have relatively small numbers of customers (58,500 for Kinder and 77,000 for Aquila).

The issue, for which the state’s largest utility, Xcel Energy’s Public Service Company of Colorado, has filed joint consensus documents with the other utilities, gets into the very arcane issue of what are appropriate utility costs and what costs should be assigned to affiliate companies. The focus is on costs of utilities and nonutilities within the state of Colorado, nothing more.

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