PUC issues verbal decision on Xcel electric rate increase
On Thursday, June 18, the Public Utilities Commission (PUC) issued a verbal decision on Xcel’s request for an electric rate increase. The decision will allow Xcel to collect about 5.8% more from its Minnesota customers. The specific amount that residential rates will increase is still to be confirmed.
In this proceeding, CUB provided testimony on the unaffordability of electric service for many customers. We argued late fees and reconnections fees should be reduced or eliminated, and Xcel’s return on equity should be reduced. Learn more about the PUC’s decision below.
Late fees and reconnection fees
The PUC granted CUB’s request to slash Xcel’s electric late fees and reconnection fees.
Currently, Xcel applies a charge of 1.5% per month to customers’ past-due balances. Xcel argued that late fees prompt customers to pay on time, but provided no support to back up that claim. CUB introduced evidence that late fees actually make it more difficult for customers to climb out of utility debt. We argued the PUC could eliminate late fees entirely.
As an alternate option, we recommended late fees be reduced to the actual cost to Xcel of carrying customers’ utility debt (0.45% per month), and that the fees be waived entirely for low-income customers. The PUC adopted this recommendation.
CUB also argued that customers who have been disconnected for nonpayment should no longer be charged additional fees to reconnect service. While the PUC did not eliminate reconnection fees for all customers, these fees, too, will be waived for low-income households.
Return on equity
Setting a utility’s authorized return on equity (ROE) is a major part of the PUC’s determination during every rate case. Xcel originally requested to increase its ROE from 9.25% to 10.3%. CUB, alongside other parties, argued that Xcel’s ROE should go down, not up. The PUC, in a 3-2 decision, decided to increase Xcel’s ROE to 9.6%.
Investor-owned utilities like Xcel are entitled to an opportunity to earn a reasonable financial return. The “return on equity” is applied to infrastructure investments the utility makes. Very simply, the higher the authorized ROE, the more customers pay, and the more utility shareholders profit. ROE is included in the base rates charged to customers, and even small tweaks cause substantial rate increases for consumers. In this case, each 0.01% increase to Xcel’s ROE was estimated to cost ratepayers nearly $1 million per year.
Xcel’s current ROE was set at 9.25% following the company’s last electric rate case in 2023. In its current request, Xcel asked to increase its ROE to 10.3%, which would be the highest authorized ROE for any investor-owned utility in Minnesota. Xcel maintained throughout the proceeding that this increase was necessary for the company to attract investors and remain financially stable. However, just two days prior to the final hearing, Xcel announced that it would agree to a commissioner’s suggestion to set ROE at 9.6%.
Every expert not affiliated with Xcel that testified in the proceeding recommended Xcel’s ROE stay at 9.25% or be decreased. This, experts testified, would help ease rate pressures on the many customers struggling to afford service while still allowing Xcel to attract capital and provide a reasonable return for shareholders. An expert witness for CUB recommended Xcel’s ROE be set at 9.0%. A group of large industrial customers recommended ROE be set at 8.96%, and the Minnesota Department of Commerce recommended 9.25%. Thousands of public commenters also urged a reduction in Xcel’s return, and many mentioned that its parent company makes about $2 billion in profit each year.
After considerable debate, the PUC increased Xcel’s authorized ROE to 9.6%. Two commissioners dissented from this vote, preferring to leave Xcel’s ROE unchanged.
Affordability programs
The PUC approved Xcel’s request to automatically enroll eligible customers in its PowerOn affordability program, which caps monthly bills at a portion of household income for income-qualified customers. Customers who receive Energy Assistance (LIHEAP) and use enough electricity to qualify will be automatically enrolled in the money-saving program. Xcel will also explore additional avenues to verify customers’ income eligibility, beyond Energy Assistance. CUB supported these changes.
(Automatic enrollment will not begin immediately. If you think you may qualify for the PowerOn program, you can apply online.)
The PUC also approved a new Residential Arrears Management Program (RAMP). This program will forgive a portion of past-due balances for customers who owe at least $300 and do not qualify for PowerOn. It will be partially funded by revenue from customers’ late fees. Xcel agreed to provide additional shareholder funding of approximately $4 million per year in 2026 and 2027. Xcel will not recover this cost from ratepayers, which was a commitment tied to the company’s ROE being set at 9.6%.
Interim rates and a possible refund
Xcel originally filed this multi-year rate case in 2024. They proposed to raise rates in two steps, with increases in both 2025 and 2026.
In its decision, the PUC approved an overall rate increase of 2.3% for 2025 and an additional 3.4% for 2026 (for a total increase of about 5.8%). The specific rate increase for residential customers will be confirmed by a future filing in the proceeding.
Xcel has been charging an “interim” rate increase of 5.2% since January 2025. If the final approved increase for either year is lower than the 5.2% interim rate increase that customers paid, the balance will be refunded to customers. If final rates are higher than 5.2%, customers will not be charged the difference.
What’s next
The PUC is expected to issue a written order formalizing its decision by July 31, 2026. If no party petitions the PUC to reconsider any aspect of the order, the new rates could go into effect as early as this fall. CUB will continue to advocate for affordable service in future rate case filings and other proceedings before the PUC.