After years of costly wildfires, the insurance affordability crisis isn't just burdening Colorado homeowners with massive premium increases. Insurers are now dramatically increasing premiums for Xcel Energy, the state's largest utility.

And the company wants customers to pay for it at some point.

Last month, Xcel Energy told the Colorado Public Utilities Commission that its “excess liability insurance” had increased nearly 400 percent compared to the previous year. In its filing with regulators, Xcel Energy estimated it would pay $49 million for insurance this year as of Oct. 18.

The company did not immediately share with CPR News the final cost of its premium or the name of its insurers.

The company uses this insurance when its employees or equipment cause catastrophic events, such as wildfires, that can result in costly property damage and loss of life. In its filing, Xcel Energy said climate change, “unprecedented” wildfire danger and lawsuits are driving up rates for all major Western utilities.

Xcel Energy is currently facing at least 300 lawsuits over its alleged role in starting the Marshall fire — which the utility has denied — and additional lawsuits blaming its energy equipment for starting the largest wildfire in Texas.

In its filing, the utility argues to Colorado regulators that its premium increase is an extraordinary circumstance, as are the costs it incurred during the COVID-19 pandemic outbreak. The company wants regulators to be able to track how much it spends on insurance so that it can eventually reimburse those costs to Coloradans months or years later, perhaps after deducting additional interest.

The utility commission decides how much Xcel Energy can charge its customers for costs such as insurance or building new power plants, typically through discussions in a rate case.

Because interest rate events typically only occur every few years, Xcel Energy is asking regulators to potentially charge customers for insurance sooner, consumer advocates said.

“The company is seeking expedited reimbursement of these costs outside of a rate case,” said Joseph Pereira, deputy director of Colorado’s Office of the Utility Consumer Advocate, an independent state agency that advocates on behalf of utility customers.

“The question really is: Does the company get expedited treatment or does it have to wait until the next tariff case to get those dollars back in its coffers?”

According to Pereira, Xcel Energy's request amounts to an accounting trick. He said the utility should wait until the next rate case to argue why Coloradans, not corporate shareholders, should pay its insurance bills.

There are some signs that government regulators are sympathetic to this argument. Dipesh Dipu, a financial analyst at the Utilities Commission, recommended that regulators reject Xcel Energy's application and that the company wait until there is a rate case to try to recoup its insurance costs.

“A future tariff case, by providing greater access and ability to review cost information … provides a far better platform to address the issue at hand,” Dipu wrote in a response to Xcel Energy’s filing.

In an emailed statement to CPR News, an Xcel Energy representative said maintaining reporting is critical to the company.

“We propose to track and defer the costs associated with excessive liability insurance premiums and will not attempt to incorporate these costs into rates until a future rate event,” the spokesperson wrote.

A leaning, unstable tower

Xcel Energy's excess liability insurance is offered by several different companies that cover claims in a specific order. In a filing with regulators, the utility likened the way it stacks its insurance policies to a tower.

On the lower floors of the tower, Xcel Energy uses “mutual insurers,” which the company says offer the most comprehensive coverage. In the middle floors, the company buys its insurance in commercial markets in London, the United States and even Bermuda.

The glue holding the tower together is an internal insurance company created by Xcel Energy's parent company that fills any gaps in coverage.

Since 2014, Xcel Energy has spent tens of millions of dollars from customers paying for its insurance tower. But more insurers are turning tower construction into a game of Jenga, prompting Xcel Energy and other utilities to look for more stable options.

Southern California Edison, a California utility, has pooled some of its own money to settle wildfire claims. This model is called “self-insurance,” and Xcel Energy said in a filing that it is considering insuring itself in the future.

But Xcel Energy says it needs its liability insurance for now to keep customer bills low and ensure investors continue to invest despite the rise in costs.

“The more than tripling of the premium has no historical basis,” Steven P. Berman, vice president of Xcel Energy, wrote in a filing with regulators.

Will costs go down?

In June 2024, Xcel Energy presented regulators with a comprehensive plan detailing how the company will improve its operations to reduce the likelihood that its power lines and other equipment will spark a wildfire.

The company hopes, but cannot guarantee, that its wildfire protection plan will ultimately lead insurers to lower its premium. However, according to its filings, the company doesn't know when its insurance costs might return to historically normal levels.

Berman, the vice president of Xcel Energy, contends that increased insurance costs are “largely beyond the utility’s control.”

Todd Logan, an attorney with Edelson PC who is suing Xcel Energy on behalf of hundreds of Marshall fire survivors, disagrees. He said Xcel and other Western utilities are trying to pass on the costs of alleged negligence through their insurance companies.

Some utilities saw their rates rise after jurors found them responsible for causing wildfires.

“The utilities know they cannot demand rate increases to cover the costs of their misconduct,” Logan wrote in an email to CPR News. “Instead, they are cynically trying to delay rate hikes for a few years in the hope that everything will be swept under the rug when they ask about it later.”

Logan's firm represented over 1,500 people who sued PacifiCorp, an Oregon utility, for starting massive fires in 2020. In 2023, an Oregon jury found the company responsible for starting four of these fires and ordered the company to pay damages to thousands of homeowners. Since then, PacificCorp's liability insurance has increased by $96 million.

In 2023, the company applied to Oregon regulators to track its costs so it could ultimately bill its insurance costs to customers. In 2024, regulators agreed.

Dipu, the financial analyst for the Colorado Utilities Commission, recommended that if jurors find Xcel Energy responsible for starting the Colorado fires, the company should not charge insurance costs related to those fires.

Colorado regulators will hold a hearing in November and make a decision in December.”

Editor's note: This story has been updated to include details of the lawsuit against PacifiCorp, additional comments from the Public Utilities Commission's financial analyst and an updated Colorado hearing schedule.