Published December 14, 2022
Last year, Xcel Energy filed a request with the Public Utilities Commission (PUC) to increase rates for its Minnesota electric customers. Because the process for evaluating whether these new rates should be allowed (i.e. a “rate case”) takes time, Minnesota law allows Xcel to increase electricity rates on a temporary basis while its rate case is pending. In December 2021, the PUC limited the amount that Xcel could recover on an interim basis to 8.9 percent for residential customers. This change, which went into effect at the start of 2022, has been in place for the entirety of the past year. However, in September 2022, Xcel requested to almost double the amount charged on an interim basis to 17.5 percent. CUB is continuing to fight against Xcel’s overall rate increase, but we are happy to announce that Xcel withdrew its interim request this past Thursday. While this does not mean that the rate case is over, it does mean that Xcel customers won’t pay more for electricity service while the rate case is being decided.
CUB, along with other parties to the rate case, filed comments in opposition to Xcel’s second interim rate increase when it was originally filed. We argued that Minnesotans are facing inflationary pressures across all aspects of their lives, and charging 17.5 percent more for the same service is an enormous rate increase—even at the end of a rate case proceeding. Other parties shared our concerns and advocated for the PUC to deny Xcel’s request.
In response to these comments, Xcel proposed an alternative that would allow it to withdraw its requested increase and keep interim rates the same. There were two primary factors driving Xcel’s proposal. First, Xcel agreed to decrease its request by $54 million in anticipation of changes in its rate case. This reduction was associated with extending the “depreciation lives” of certain nuclear and wind facilities. Essentially, this would allow Xcel to recover its costs for those facilities over a longer period of time, thereby reducing the amount of money needed to be recovered in the short-term. Second, Xcel stated that it was willing to entirely withdraw its second interim rate request if the PUC approved an adjustment mechanism for capacity auction revenues. Simply put, when Xcel has excess capacity, it auctions it off in a regional market. This can result in a significant amount of additional revenue being generated, which Xcel agreed should be credited to ratepayers. The proposed adjustment mechanism would allow any revenues from 2023-2024 auctions to offset the costs being evaluated in Xcel’s rate case. The amount of revenues credited to customers would be adjusted annually to reflect actual auction results.
Last Thursday, the PUC heard from parties on whether it should approve Xcel’s proposal. Although there were some concerns about pulling issues out of the rate case, the PUC ultimately decided to approve the adjustment mechanism for capacity auction revenues. As a result, Xcel withdrew its interim rate request and its customers will not see an additional increase in rates until the company’s rate case is complete.
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Xcel has surplus revenue because it was selling excess capacity, not energy, into MISO’s capacity auction.
Thanks Isaac, the blog post has been updated to better clarify the source of MISO capacity auction revenues.