Why Does Xcel Energy Keep Raising Rates? How Utility Profits Actually Work
If you’ve ever opened your Xcel bill, stared at the total, and wondered, What exactly am I paying for here? Fair question.
Before we jump in, here are three things you need to know:
You may currently think of Xcel as your energy company. After this article, you may think of it more like a developer.
Selling you electricity and gas is not the main driver of Xcel’s profits. Building energy infrastructure is.
Xcel’s forecasts for Colorado’s future energy needs keep pointing toward the same answer: building more – mostly to power data centers.
See the conflict of interest forming? Let’s get into why it exists.
Coloradans are using less energy. Xcel is still making record profits.
Thanks largely to energy-efficiency efforts, Xcel’s Colorado customers are using less of the company’s power.
Xcel is selling the same amount of electricity as it did at the turn of the century, even though it’s now serving almost 400,000 more customers than it did in 2000. In fact, in the past five years, Xcel’s residential electricity sales in Colorado have actually fallen 4%, while retail natural gas sales have dropped 11% (1).
Yet, Xcel’s Colorado subsidiary reported a $974 million operating profit in 2025 (2) – a record amount before the company paid out nearly $300 million to settle claims from the Marshall fire – and its parent company also earned a record-breaking $2 billion (3).
So, how does Xcel make more money while selling less energy?
It starts with something called cost-of-service regulation.
Xcel is a regulated monopoly. In exchange for being the only electric or gas utility serving most customers in its territory, the Colorado Public Utilities Commission, or PUC, reviews what Xcel spends and decides how much it can charge customers.
Those rates are designed to cover Xcel’s operating expenses and give the company an opportunity to earn a profit on approved investments.
That last part is key.
Xcel doesn't mark up the natural gas or other fuel it buys for customers. Those costs are passed directly through to customers without any additional earnings. Instead, the company primarily earns profits by building infrastructure.
When Xcel builds a power plant, pipeline, transmission line, or other piece of energy infrastructure, customers pay back the cost through their bills, plus Xcel collects an additional return on equity for its shareholders, typically in the range of 9-10%.
That dynamic creates a built-in incentive for Xcel to build, build, build, regardless of whether it's needed.
The more money Xcel sinks into approved infrastructure, the larger the pool of investments on which it will earn a return, or profit.
By this point, that pool is feeling like an ocean: Xcel’s Colorado property, plants, and equipment were valued at $27.8 billion in 2025 (4), up a whopping 51% from 2021, and more than doubled in the last 10 years (5). That growth matters because it shows how much they’re billing ratepayers to pay for it, and how much profit ratepayers pay on top of that. Profit that goes straight to Xcel’s C-suite and shareholders.
With that growth, and captive ratepayers paying the bill for it, no wonder financial news outlets usually recommend rich people become Xcel shareholders; they are nearly guaranteed to get their money back.
In normal-person language: Xcel doesn't need you to use more energy to grow its business. Electricity and gas sales are, in fact, flat or declining. Instead, Xcel fattens its bottom line by building more infrastructure.
That doesn't mean every project Xcel proposes is unnecessary.
It does mean the system gives Xcel a financial incentive to favor capital-heavy solutions over alternatives that require less utility-owned construction, or that help customers use even less electricity or gas. When Xcel is seeking the PUC’s approval to build this infrastructure to achieve its profit goals, the utility has every incentive to make sure its internal data shows that its plan is the only way to fulfill Colorado’s energy needs.
When Xcel says we need to build more, we should ask more questions
Utility companies absolutely need to prepare for times when energy demand is extremely high.
Think 100-degree summer afternoons when air conditioners across Colorado are working overtime. The highest amount of electricity customers need at once is called peak demand, and utilities need enough resources available to meet it.
Nobody wants rolling blackouts because we decided to wing it.
The question is: how much Xcel actually needs to build to prepare for that demand?
Xcel expects energy use to grow because of new homes, businesses, and especially data centers. But there's enormous uncertainty in those forecasts. Xcel’s projections for new large electricity users range from 3 to 20 terawatt-hours, representing growth 10 to 25 times faster than Colorado’s historical average (6).
If Xcel builds too little, reliability could suffer. If it builds far more than customers ultimately need, those construction costs don't disappear. Once new infrastructure is approved and built, customers are on the hook for paying it off, even if it’s unneeded and underused, for decades.
That’s why “We might need more power” should not automatically translate into “Build everything.”
Battery storage, energy efficiency, weatherization, demand-response programs, distributed solar, and shifting electricity use away from the busiest hours can all reduce the amount of new infrastructure Colorado needs.
One of Colorado’s neighbors, Texas, proves the case on that.
The PUC has the authority to scrutinize Xcel’s forecasts, reject unnecessary spending, and require the company to consider more affordable alternatives. That oversight matters because keeping the lights on should never become a blank check.
Building the right things matters more than simply building more
Colorado needs to invest in its energy system. But sticking with fossil fuels is not the cheap default it's often made out to be.
New utility-scale solar and wind are already among the least expensive sources of new electricity. Homegrown solar and wind can require new transmission, storage, and other investments to serve customers reliably. But coal and gas come with infrastructure and ongoing fuel costs that are vulnerable to volatile price spikes since they’re part of a global commodities market that Colorado has no control over.
The business-model problem isn't that Xcel can only profit from fossil fuels. Xcel can earn returns from approved clean-energy infrastructure, too.
The real concern is whether customers are paying for the most affordable combination of clean generation, storage, transmission, efficiency, and demand management, or simply the combination that requires the most utility investment, and therefore, creates the biggest profits for these monopolies like Xcel.
With an earnings track record like Xcel has achieved – profits up 53% in the last decade – it’s clear the latter is currently winning (7).
But we’re making progress. Colorado regulators approved a lower-demand scenario in Xcel’s latest resource plan rather than allowing the company to build immediately for its highest forecast. That is exactly the kind of scrutiny customers need!
Because every time Xcel says Colorado needs another major investment, we should ask:
Do we need it? Is there a cheaper alternative? Who carries the risk if the forecast is wrong? And who benefits financially if we build it?
Those are not anti-utility questions.
They are exactly the questions customers of a monopoly should be asking.
Footnotes (because we are serious about bringing you only the facts):
(1) See Public Service Co. of Colorado (the name of Xcel’s Colorado subsidiary) annual reports from 2000-2025 filed with the Securities and Exchange Commission. https://www.sec.gov/edgar/browse/?CIK=81018
(2) Public Service Co. of Colorado Consolidated Statement of Income for 2025, available through the company’s annual report filed with the Securities and Exchange Commission. https://www.sec.gov/ix?doc=/Archives/edgar/data/0000081018/000008101826000003/psco-20251231.htm. Page 25
(3) Xcel Energy Consolidated Statement of Income for 2025, available through the company’s annual report filed with the Securities and Exchange Commission. https://www.sec.gov/ix?doc=/Archives/edgar/data/0000072903/000007290326000009/xel-20251231.htm. Page 47.
(4) Public Service Co. of Colorado Consolidated Balance Sheet for 2025, available through the company’s annual report filed with the Securities and Exchange Commission. https://www.sec.gov/ix?doc=/Archives/edgar/data/0000081018/000008101826000003/psco-20251231.htm. Page 28.
(5) Public Service Co. of Colorado annual reports from 2000-2025.
(6) https://coloradosun.com/2026/03/12/xcel-building-boom-data-centers-electric-bills/
(7) https://www.macrotrends.net/stocks/charts/XEL/xcel-energy/gross-profit
Additonal sources:
Sources: Public Service Co. of Colorado annual reports filed with the Securities and Exchange Commission, the Colorado Sun on Xcel’s 2025 profits and capital investments, Colorado Public Radio on utility profits and return on equity, The Colorado Sun on Xcel’s demand forecasts and potential overbuilding, Reuters on current wind, solar, and natural-gas generation costs, and Future of Heat gas usage report.
