Indicative of the wholesale energy market volatility in approaching winter, Minnesota-based Xcel Energy Monday announced it will lower its electric utility rate increase request to the Colorado Public Utilities Commission by $41.5 million in the wake of what it called “recent decreases in natural gas prices nationwide.”

Xcel’s filing reduced its Oct. 5 “electric commodity adjustment (ECA)” request 35.8%, keeping the proposed Nov. 1 effective date.

Xcel also said it will file an annual ECA with the Colorado PUC on Dec. 1 to be effective with the New Year, Jan. 1. Under Colorado rules, Xcel was mandated to make its original filing because the difference between retail rates and its power costs had passed a threshold level; the utility was not required to make the updated filing, but Xcel said it was doing so to “better reflect current market prices.”

In addition to the lower-than-expected projected gas prices, Xcel said its hedging strategy paid off for about a $5 million cost reduction in each of the next two months, November and December.

The parent of Public Service Company of Colorado said its ECA request is now $74.5 million, compared to its original $116 million increase request. “The ECA filing seeks to recover costs associated with rising generation fuel and purchased energy costs, primarily from natural gas,” a Denver-based Xcel spokesperson said. The revised increase would mean a monthly increase of a little more than $10 for a typical residential customer, the utility said.

Noting that the company now thinks the impact of the high wholesale natural gas prices “will be less than what the market was showing last month,” Xcel’s Fred Stoffel, vice president of policy development, called the amended filing “good news for Colorado energy consumers.

“The filing also shows the highly volatile nature of the natural gas marketplace and the extreme difficulties associated with trying to predict where prices will go,” said Stoffel, noting that Xcel was attempting to pass on any price reductions as quickly as it could.

Xcel said lower natural gas prices in recent weeks are attributable to four factors it has identified: (1) gas storage levels are near the five-year average; (2) post-hurricanes the Gulf of Mexico production is returning; (3) recent winter weather forecasts do not predict significant periods of colder-than-normal conditions; and (4) the most recent hurricane — Wilma — is not greatly affecting natural gas production.

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