Xcel Energy on Tuesday dropped its highly contested request for a $122 million rate increase in 2023 after state utility regulators essentially approved an accounting change for the company.
The $122 million rate hike would have increased residential customers' bills another 6 %. It was strongly opposed by ratepayer advocates — including two state agencies — who say Minnesotans are already reeling from energy price inflation.
Minneapolis-based Xcel is by far Minnesota's largest electricity provider, serving 1.3 million customers.
Seeing fierce opposition, Xcel recently filed a complicated alternative plan with the PUC that would reduce its interim rate request to $68 million — or eliminate it altogether. The plan centers on changes in accounting for certain costs and revenues.
The Minnesota Public Utilities Commission voted unanimously to accept Xcel's plan — extinguishing the rate hike request
The Minnesota Department of Commerce had argued that Xcel's last-minute plan would "create unnecessary procedural and record uncertainty. … Xcel's late-filed letter underscores that Xcel does not need an additional increase to its interim rates."
Still, an attorney for the Commerce Department noted at Thursday's PUC meeting that its opposition was "procedural" and not "substantive."
While some PUC commissioners voiced concerns about tinkering with rate case procedures, they agreed that Xcel's plan had low risk and was in the public interest.
"On balance, this is a thoughtful way to move forward without an interim rate increase," PUC Commissioner Matt Schuerger said at the meeting.
Last October, Xcel filed for a rate increase of $677.4 million — or 21.2% — over three years. The PUC commonly grants interim rate increases to electric and gas utilities until a full rate case is settled.
So a year ago, the PUC allowed Xcel a 2022 interim rate increase for all customer classes of $247.1 million. That included $79.8 million from residential ratepayers, about $41 million less than the utility requested.
The PUC noted at the time that Xcel's residential customers were "under financial distress."
Even with the $41 million reduction, the PUC granted Xcel a residential rate hike for 2022 that translated into a 6.4% increase in an average household's electric bills.
The Commerce Department, the Minnesota Attorney General's Office and the Citizens Utility Board of Minnesota (CUB) all contend that Xcel's customers are under at least as much financial distress this year, if not more — and all oppose any interim rate increase. The Commerce Department and the Attorney General's Office are both charged with looking out for ratepayer interests before the PUC.
"Ratepayers are experiencing extreme inflation in the energy sector as well as for other essential needs," the Commerce Department said in a PUC filing. Soaring natural gas prices have remained "stubbornly high as ratepayers head into the winter heating season."
In August, Xcel reported that 181,293 of its residential customers were past due on their bills, more than 14,000 above July's numbers and 12,000 more than in August 2021, according to a Commerce Department filing.
Minnesota expects to help 127,000 low-income households this winter with heating bills — the same as last year. However, recipients in the state's assistance programs will not receive as much help this year because last year the state received extra funding from the American Rescue Plan Act.
Xcel said in a filing that inflation also is affecting the company's purchases of goods and services to maintain and improve its electricity system. "The continued impacts of inflation, therefore, do not warrant a denial of the 2023 [interim rate request]."
Annie Levenson-Falk, CUB's executive director, said in an interview that "if you look at who inflation is hurting most, it is Xcel's ratepayers. The company is doing OK. … If you look at who is most impacted by rising prices, it's consumers with lower incomes."
In PUC filings, CUB notes that the interim Xcel residential rate increase granted by the PUC last year actually amounted to over 8% — and so would this year's if it is allowed. That's because rate increases cover only a portion of the overall bill.
Xcel says it needs the $122 million interim rate increase in 2023 for many reasons, including funding its ongoing investments in carbon-free power and to invest in its core infrastructure.
The PUC is expected to adjudicate Xcel's three-year rate case in 2023. Customers get refunds if a final rate hike is lower than interim increases allowed by the PUC. Rates increases requested by utilities are often higher than what the PUC eventually allows.
The Attorney General's Office, in PUC filings, said the record developed so far in Xcel's full-rate case suggests that the company's final rates will be significantly lower than what the company has requested.
The Commerce Department, in a filing, said that with the interim increase granted by the PUC a year ago, Xcel is already collecting more revenue than the department has recommended.