AG, CUB ask PUC to reverse decision to increase Xcel’s authorized return
Today, CUB and the Office of the Attorney General each filed petitions with the Minnesota Public Utilities Commission (PUC), requesting the PUC reconsider a recent decision allowing Xcel to substantially increase the amount it charges to ratepayers to fund the company’s return.
This decision was part of a broad determination on a request by Xcel to increase its electric rates. In its decision, the PUC approved a rate increase that was substantially less than Xcel had requested and took important steps to reduce late fees, reduce reconnection fees, and expand targeted affordability programs.
However, the PUC also allowed Xcel to increase its authorized return on equity. CUB believes the decision to increase Xcel’s return was neither in the public interest nor supported by record evidence in the case. Similarly, the Attorney General stated the “decision was not supported by the record and lacked sufficient explanation.” Both parties are asking the PUC to reverse this decision.
The rate case
Xcel is a for-profit company that provides electricity service to every home and business within its service territory. Because utilities are granted monopolies in Minnesota, the rates they charge customers must be approved by state regulators, the PUC.
In November 2024, Xcel filed a request with the PUC to raise its rates. This kicked off a rate case: an extensive process in which the Minnesota Department of Commerce, the Attorney General’s Office, and other parties like CUB examined Xcel’s request to determine if we believed the increase was justified. Each party submitted expert testimony and legal briefs arguing to reduce the increase for various reasons. These arguments were heard by an administrative law judge, who summarized the evidentiary record and made recommendations to the PUC. In June 2026, the PUC met to determine what Xcel’s final rates will be.
Return on equity and Xcel’s request
Investor-owned utilities are permitted to earn a return on the investments they make (the return on equity, or ROE). This ROE is applied to a portion of every utility investment in power generation, electricity wires, meters, and more, and it is baked into the rates charged to customers. Under Minnesota law, the return should cover the utility’s own financing cost plus a “reasonable” return for the company and its shareholders.
In this case, Xcel asked to increase its ROE from the previously authorized 9.25% to 10.3%. This ROE increase, alone, would have added about $100 million per year to the amount Xcel charges its Minnesota electric customers. Throughout the case, Xcel argued that a 10.3% ROE is needed to attract investors and compete with similar companies. According to Xcel, if ROE were set below 10.3%, it could make it difficult for the company to make necessary investments, paradoxically increasing costs for customers or even degrading the company’s service.
However, two days before the PUC met to make its final decision on June 18, Xcel abruptly stated that an ROE of 9.6% would be sufficient.
At the conclusion of the rate case, the PUC held two hearings, one week apart. After the first hearing—where parties presented arguments and the commissioners asked questions—two commissioners filed documents signaling what ROE they would likely support when they met to make final decisions in the second hearing. One commissioner supported keeping Xcel's ROE at 9.25%, while the other supported increasing it to 9.6%. Then, two days before the PUC met for its second hearing, Xcel filed a letter indicating it supported a 9.6% ROE. Xcel did not explain why it suddenly departed from the analysis it had stuck by over the previous 19 months.
Increasing Xcel’s ROE to 9.6%—though lower than its initial request—was still estimated to add approximately $34 million to costs paid by ratepayers each year.
Xcel does not need a higher ROE, and ratepayers can’t afford it
The Minnesota Department of Commerce, a coalition of large industrial customers, and CUB each conducted independent analyses of Xcel’s ROE, and none concluded that Xcel needs a higher ROE. The Department of Commerce recommended keeping Xcel’s ROE steady. CUB recommended reducing it to 9.0%. The large industrial customers recommended reducing it to 8.96%. Each of these parties filed testimony from finance experts supporting their recommendations and argued that Xcel had not justified a need for a higher ROE.
Indeed, Xcel has performed well for its shareholders. It acknowledged it “has not experienced difficulties accessing capital.” Its parent company reported more than $2 billion in earnings in 2025, and Minnesota provided the largest share of earnings of any state in which Xcel operates.
Many of Xcel’s ratepayers, on the other hand, are struggling to afford electric service already and cannot afford the additional cost of an unnecessary increase to the company’s return.
- Xcel disconnected a record 56,823 households for nonpayment in 2025.
- Collectively, Xcel’s residential customers are roughly twice as far behind on electric bills as prior to the COVID-19 pandemic.
- Minnesota households continue to struggle with inflation on basic necessities. 59% have experienced difficulty paying for usual household expenses. 36% of Minnesota’s low-income households have kept their homes at unhealthy or unsafe temperatures to try to save on utility costs.
- More than 8,500 public comments have been filed opposing the rate increase. This compares with approximately 500 public comments received in Xcel’s most recent rate case, between 2021-2023.
- Numerous public commenters stressed that they struggle to afford electricity service, including many who earn too much to qualify for income-qualified programs.
- More than half of the public comments express unhappiness with the company’s profits or return on equity.
The PUC should reconsider its decision and set Xcel’s ROE no higher than 9.25%
CUB’s filing today requests that the PUC reconsider its decision and instead set ROE at no higher than 9.25%.
First, the PUC’s order does not adequately consider customers’ ability to pay an increase to a 9.6% ROE, while the record shows that many Xcel customers are struggling to afford electricity bills.
Second, substantial evidence introduced by parties in the case already showed that Xcel’s analysis significantly overstated the ROE the company requires. By agreeing to a 9.6% ROE, Xcel itself confirmed this. With this agreement, Xcel stated the company could operate with an ROE that was far lower than the range its own expert testified was reasonable. For this reason, Xcel’s analysis is not credible evidence the PUC can use to determine a reasonable ROE. The administrative law judge who oversaw much of the case also relied on Xcel’s witness to ground his recommendation to increase the company’s ROE, so that recommendation, too, lacks evidentiary basis in the record.
That leaves the PUC with the three other ROE analyses, ranging from 8.96% to 9.25%. The PUC should reopen its decision and set Xcel’s authorized ROE within this range. Doing so would save Minnesota ratepayers tens of millions of dollars each year.
Return on equity is a major national issue
This decision comes at a time of heightened focus on utility returns nationwide. As described in a recent article from Energy and Policy Institute:
“Nearly two-thirds of respondents to a Pew Research poll blamed utility greed for rising utility bills, while a recent Data for Progress poll found that restricting utility companies from passing unreasonable costs to customers was a top issue for swing voters.”
The Governor of Pennsylvania has publicly called for utilities to rein in excessive ROEs, and that state’s House of Representatives unanimously passed a measure intended to do so.
The Governor of Connecticut called for caps on utility ROEs and a number of other reforms, saying the “utility model is no longer built for Connecticut families, it’s built to serve utility shareholders,” and that “ratepayers have been treated as a captive source of revenue while profits climbed.”
The Governor of Indiana demoted, then fired, the chair of the Indiana regulatory commission after he supported a utility rate increase.
In Michigan, too, legislators have introduced a bill that would cap ROEs, and the leading Democratic candidate for governor is promising to “end unfair profit-driven rate hikes.”
Interestingly, utility regulators in Maryland were recently presented by ROE analyses by the same witnesses who testified for Xcel and CUB: Joshua Nowak and Steve Kihm. The Maryland commission concluded that Dr. Kihm’s analysis was reasonable analysis, while Mr. Nowak’s was not, and the commission reduced that utility’s ROE.
What’s next for the Xcel rate case
Besides ROE, the Office of the Attorney General also asked the PUC to reconsider decisions regarding how Xcel treats certain pension expenses, slightly adjust the amount it may charge ratepayers to compensate executives, and change how it refers to one billing category. Xcel also requested the PUC clarify certain aspects of its order.
Parties have an opportunity to respond to the filings made by CUB, the Office of the Attorney General, or Xcel within 10 days.
Any member of the public may also file a comment by emailing consumer.puc@state.mn.us and including Docket #24-320 in the subject line. You can also use the PUC’s online comment form. Please know that any identifying information included in your comment will become part of the public record.
The PUC will then determine whether or not to reconsider its decision. It may do so with or without a public hearing. Unless any party appeals the PUC’s decision to the Court of Appeals, the final rate increase could go onto customers’ bills this fall.
We’ll keep you up to date on the PUC’s decision. Follow this space or subscribe to CUB’s email newsletter for updates.