Watchdog group claims Xcel Energy is collecting and distributing "1% fund" unfairly

A group of Colorado residents is taking on the state's largest energy provider -- Xcel.

Citizens Against Utility Abuse claims Xcel Energy is collecting funds to help cities pay for undergrounding power lines, but not all customers will benefit. 

In recent months, the importance of that undergrounding work has been in the spotlight.

Just last month, a massive fire devastated parts of Texas, and investigators now believe it was caused by an old power pole that snapped in high winds. In Colorado's Marshall Fire back in 2021, authorities pointed to a damaged power line as one of two sources of ignition as well. 

"We all remember that, and we have experienced high winds too. We got a lot of powerlines that kind of brought it to the forefront of everyone's attention," said Mayor Chris Wolfe of the Town of Morrison.

Morrison had its own wildfire scare last spring when a power line went down just a few miles away.

"It could have been a risk for a lot of people if it would have been the wind direction another way or if it would have been here in town or closer," Wolfe added.

Those risks are fueling their push and others around the state to move power lines underground; the only hesitation is cost.

"It could be millions," Wolfe said.

For decades, Xcel Energy has operated what's known as the "1% fund," designed to help with the financial burden of moving those lines in the public right of away underground.  

"It's about the sales overall, and we take 1%, and we set it aside, and the counties and the cities and towns have discretion on where they want to use that money to underground," said Hollie Velasquez Horvath with Xcel Energy.

Velasquez Horvath is Xcel Energy's vice president of state affairs and public relations. She says that 1% comes out of a customer's general rate; it is not an extra fee.

Citizens Against Utility Abuse argues it's unfair to charge the same rate to customers who live in unincorporated areas and don't have the same benefits. 

"It's what that fee is being used for. It's a fee designed for agreements, franchise agreements so that fee is billed. So then, you give the city to underground utilities. While you live in an unincorporated county, you don't get that benefit," Brad Evans said.

Evans heads up the watchdog group and pointed to those living in unincorporated Jefferson County as one example.

Treasurer Jerry DiTullio of Jefferson County says it's roughly 81,000 people.

"That averages about $1.3 million a year," DiTullio said. "So what I see is that money coming into Xcel, they are putting it in the bank, and it's earning interest, and it's growing with interest, but it's not being spent in the area it was collected for -- Jefferson County unincorporated."

The information about how the fund works came to the group from sources with inside knowledge of Xcel Energy's operations.

Those sources agreed to speak with CBS News Colorado anonymously, adding that, "There's no legal process for even considering monies being distributed in a non-franchise county area; it simply can't be done."

Velasquez Horvath says, while the franchise city's get discretion of where and when their 1% money is used, Xcel Energy builds its rates in a way that benefit everyone.

"Our rates and how we invest in the system is very much like a socialized way, and everybody pays in, and we distribute out equally on how we upgrade our entire distribution system," Velasquez Horvath said. "So I would also say that, in those other areas that don't have the one discretion or choice, we're still upgrading, maintaining, doing underground projects in those communities. It's just not to the discretion of the government agency."

The watchdog group filed a complaint asking that the Public Utilities Commission investigate how Xcel Energy is operating the fund.

In the meantime, towns such as Morrison are just searching for their best path forward.

"If money was no object, it would probably be done already," Wolfe said.

CBS News Colorado reached out to the Public Utilities Commission for a comment on the groups concerns and said it received an informal complaint and are looking into it.