Published November 7, 2023
As days get colder and nights get longer, Minnesotans are reminded of another never-ending cycle: utilities across the state have yet again requested to increase rates. On November 1, 2023, CenterPoint and Xcel Energy filed petitions with the Public Utilities Commission seeking to raise rates for natural gas service and Minnesota Power petitioned to increase electric rates. This blog offers a high-level summary of each rate increase requested.
The procedure for a rate increase
Most of Minnesota’s largest utilities are for-profit companies owned by investors (“investor-owned utilities”). Because utilities in Minnesota have universal service territories and do not compete with other businesses for customers, customers of investor-owned utilities are protected by regulation by the Public Utilities Commission (PUC). (Minnesota also has cooperative and municipally owned utilities, which are regulated by local boards.)
Any rate increase proposed by an investor-owned utility must get approval by the PUC. The PUC conducts a proceeding called a “rate case” to consider these increases. In a rate case, the utility presents its request, justified by expert testimony on relevant issues. The Minnesota Department of Commerce, the Attorney General’s office, advocates like CUB, and the public can then weigh in on whether or not we each believe the request is justified. From the date it is filed to the date the Commission issues a final order approving a rate change, a rate case often lasts 12 months or more (though, if parties are able to reach a settlement agreement sooner, the process may not take as long). With three rate cases filed simultaneously on November 1, we expect the timing of the cases will be staggered over 2024 and 2025.
CenterPoint Energy: Natural gas rate case
CenterPoint Energy is asking to raise revenues by $136.4 million over two years, with a 6.5 percent rate hike in 2024 and a further 3.7 percent hike in 2025. If the entire rate request is granted, average household bills will go up by more than $100 per year starting in 2025.
Minnesota law allows utilities interim, or temporary, rate hikes while their rate case is pending. CenterPoint has requested interim rate increases of $69 million (5.3 percent) beginning January 1, 2024 and a further $33 million (2.5 percent) in 2025 (for a total interim increase of 7.8 percent). If the PUC decides that final rates should be lower than the interim amount, the difference will be refunded back to customers.
CenterPoint’s last rate case was decided in September 2022, when the PUC accepted a settlement agreement to raise revenues by $48.5 million, or 4.2 percent. Residential customers saw a slightly lower rate increase of 3.9 percent.
Xcel Energy: Natural gas rate case
Xcel is seeking to raise natural gas revenues by approximately $59 million, or 9.6 percent. As a result of this change, Xcel expects residential customers’ gas bills to increase by $6.93 monthly, or $83.16 annually.
Xcel has also requested to impose an interim rate on its customers. The company’s interim rate would raise revenues by $51.2 million, or 8.5 percent, beginning January 1, 2024. If this request is approved, the average household will see their monthly bills increase by $6.06 each month, or $72.72 each year until final rates are established.
Xcel’s last rate increase was approved just this year. The PUC approved a settlement to raise natural gas revenues by approximately $20.5 million, or 2.63 percent, in April 2023. (An Xcel electric rate increase of 9.6 percent was also approved in June 2023.)
Minnesota Power has asked the PUC to let it raise electric rates by $89 million, or 12 percent. This will increase monthly residential bills by $11 and yearly bills by $133.
Minnesota Power has also asked for an interim rate to be established. The interim rate of $63.8 million, or 8.6 percent, will cause average residential bills to rise by $8 per month or $95 annually beginning January 1, 2024.
Minnesota Power also received a rate increase earlier this year. In early 2023, the PUC approved a rate increase of 9.5 percent for all of Minnesota Power’s customer classes. Minnesota Power was disappointed in the size of this increase and immediately vowed to file another rate hike proposal.
In fact, Minnesota Power’s previous rate case is still tied up in litigation. The company did not agree with several aspects of the decision and took its case to the Minnesota Court of Appeals. That proceeding is still ongoing. At this point, it is unclear what effect this suit will have on the new rate case proceeding.
CUB is in the process of reviewing these filings to determine whether and how we will get involved. Utility rates must strike a balance between customers’ interest in affordable energy service and the utility’s interest in profit. We will continue to advocate for the interests of Minnesotans and will keep you updated as these rate cases proceed. We encourage you to subscribe to our newsletter to keep track of opportunities to attend public hearings and provide comments on these issues.
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