The state’s largest utility recently reached a settlement with regulators for an 8.6% increase in residential natural gas rates and a 9.2% increase for business customers. In August, the Public Utilities Commission approved a 4.77% increase in Xcel Energy’s electric rates.

Andrew Barnett, vice president of advocacy for the nonprofit Energy Outreach Colorado, said the costs have accumulated over several years, including expenses tied to new programs, energy supply and a growing customer base. He also pointed to transmission investments for Xcel’s Power Pathway project and the effects of international conflicts on fuel markets.

“It’s just been a kind of long slog where we’ve added new programs that have additional costs,” Barnett said. “All of it is just kind of adding up and piling up on customers.”

Colorado’s push to reduce greenhouse gas emissions is part of the debate over what is driving energy costs. Gov. Jared Polis set a goal in 2019 for the state to reach 100% renewable energy by 2040. State lawmakers that year also established emissions-reduction targets, including a 50% cut by 2030.

Barnett said shifting away from coal-fired power can require utilities to find replacement sources and maintain grid reliability, potentially adding costs. The PUC extended operations of Xcel’s Comanche 2 coal unit in Pueblo through the end of 2026. Comanche 3 is scheduled to retire within the next five years, alongside the state’s remaining coal plants.

Colorado officials have said the state is making progress toward its climate targets. Businesses have argued that emissions rules and building requirements can raise expenses that may ultimately be passed on to consumers; supporters say the policies are needed to reduce pollution and its health and environmental harms.

The bill increases are especially difficult for households with little financial cushion, Barnett said. The average household served by Energy Outreach Colorado is a family of three with an annual income of about $23,000, he said.

More than 1.25 million Coloradans get electricity through electric cooperatives, which face some of the same pressures as investor-owned utilities as well as challenges tied to rural labor markets, according to Tom Walch, executive director of the Colorado Rural Electric Association.

Pandemic-era supply shortages made equipment such as wire, transformers and service vehicles harder to obtain and more expensive, Walch said. Co-ops also need skilled workers to maintain systems, but finding and retaining them can be difficult in rural areas. Annual wage adjustments for co-op employees, he said, have risen from roughly 2% to 3% before the pandemic to as much as 4% to 8% now.

Walch said complying with changing regulations can add costs for smaller co-ops and urged policymakers to weigh the expense of new requirements against their intended benefits. He also cited wildfire risks, which can increase insurance costs and expose co-ops to potentially severe financial liability.

State lawmakers have taken steps aimed at making bills more manageable. Senate Bill 2, passed this year, requires investor-owned gas and electric utilities to establish frameworks for percentage-of-income payment plans and make eligibility and enrollment information available on their websites. Utilities must also determine an annual bill credit for customers enrolled in the state’s Percentage of Income Payment Program, delivered either annually or monthly.

Sen. Cathy Kipp, a Fort Collins Democrat who sponsored the measure, said the goal is to make assistance easier for eligible customers to access. Other recent legislation requires utilities to consider technologies that could increase transmission capacity and efficiency, and to plan for grid modernization.

Those measures may address access to assistance and some system costs, but the pressures on bills remain. For households earning low incomes, Barnett said, even temporary increases during the transition to a different energy system can be difficult to absorb.