Published October 27, 2022
Last year, Xcel Energy filed a request with state regulators to charge its Minnesota electric customers an additional $677 million over the coming years. In its filing, Xcel addresses several reasons why it seeks to raise rates. For example, Xcel notes that it will be incurring additional costs to build new transmission lines and otherwise invest in utility infrastructure. Xcel also seeks to increase the profits it earns for its shareholders. If approved, Xcel’s proposal would cause many Minnesota households’ electric rates to increase by more than 24 percent by 2024. To put that another way, a typical Xcel residential customer would see their electric bills increase by $18.56 per month or $222.67 per year. This is a significant increase.
Xcel’s request is currently going through a multi-month legal proceeding (to which CUB is a party) before a judge. Eventually, the judge will make a recommendation to the Minnesota Public Utilities Commission (PUC), which will have the final say in determining whether, and by how much, Xcel is permitted to raise its rates.
In the meantime, Minnesota law permits Xcel to increase rates on an interim (temporary) basis while the legal proceeding is underway. Xcel’s residential customers have already been experiencing an 8.9 percent interim rate increase since January 2022. Notably, this interim rate increase was lower than Xcel had requested. In December 2021, the PUC limited Xcel’s requested interim rate increase to help reduce rate shock to Xcel’s residential customers, who the PUC noted were already struggling with COVID-19-related health and financial burdens and rising inflation. Despite the PUC’s 2021 finding, Xcel recently filed another interim rate hike request, which would raise residential customers’ interim rates by an additional 8.55 percent beginning January 1, 2023.
This blog post provides an update on where things stand in Xcel’s ongoing rate case proceeding and details CUB’s efforts to fight against Xcel’s requested rate increase.
CUB’s arguments in the rate case proceeding
CUB—along with the Minnesota Department of Commerce, the Office of the Attorney General, and several other parties—is pushing back on Xcel’s request to increase rates. We are focused on three key issues:
- Opposing Xcel’s request to raise its Return on Equity (ROE) rate
- Proposing controls on costs passed on to customers from bill riders, and
- Opposing Xcel’s recent request for another interim rate increase
CUB engaged two expert witnesses to review Xcel’s rate increase proposal and provide written testimony on behalf of CUB. Steve Kihm is an independent consultant who also works for the Citizens Utility Board of Wisconsin, and Ron Nelson is a director at Strategen Consulting. Both Steve and Ron argue that certain aspects of Xcel’s rate increase are unreasonable.
Through Steve Kihm’s testimony, CUB pushes back on Xcel’s request to increase its authorized return on equity, or “ROE.” Through its ROE, Xcel can earn more profit for its shareholders by raising customers’ rates. Xcel is currently authorized to earn an ROE of up to 9.06 percent. In its rate case filing, Xcel requested to increase that amount to 10.2 percent. Though a 1.14 percent ROE increase may not sound like much, it is a significant factor in Xcel’s requested rate increase. As noted by another party’s expert witness, “In 2022, the Company’s proposed ROE increase amounts to more than 20 percent of the Company’s proposed revenue increase from residential customers.” Dr. Kihm provided well-supported testimony and evidence demonstrating that the models and arguments Xcel uses to justify its ROE request are faulty and inappropriately engineered to produce a result that is favorable to Xcel. We are confident that Dr. Kihm’s testimony will help CUB and other parties argue to the Commission (and that the Commission will agree) that Xcel has not met its burden to prove its requested ROE is reasonable under the circumstances.
In Ron Nelson’s testimony, CUB identifies several policy proposals to help keep Xcel’s costs (and rates) in check. For example, Mr. Nelson testifies that Xcel should have caps on how much revenue it can collect from customers through bill riders (think of all those extra line items on your electric bill that add charges to the base rate charge). He also argues that Xcel should have some skin in the game when it comes to the cost of fuel for its power generators. Rather than pass fuel costs straight through to customers, Xcel should share in any extra costs (or savings), so that it is motivated to get the best price possible for customers. We are confident Mr. Nelson’s testimony, too, will help CUB and other parties support actions the Commission could take to help ensure Xcel reasonably contains its costs in the future.
Finally, CUB also pushed back on Xcel’s request to raise interim rates in 2023. In comments filed on October 21, 2022, we noted that many of the same financial challenges that caused the PUC to limit Xcel’s 2022 interim increase still apply today. Inflation, in particular, continues to raise significant challenges for many Minnesotans. According to the U.S. Bureau of Labor Statistics, consumer prices spiked 9.1 percent year-over-year at the end of June 2022—the largest increase in 40 years. As shown in a recent poll, general inflation has already caused many Minnesotans to feel moderate to significant financial stress. That stress will likely increase for Minnesotans who will be relying on natural gas to heat their homes over the winter. A recent National Energy Assistance Directors Association report projects a 17.2 percent jump in average home heating costs this winter. With these concerns in mind, we recommended that the PUC deny Xcel’s 2023 interim rate increase request, or, at the very least, that the Commission limit that increase for residential customers to account for ongoing financial challenges that will continue into next year. We anticipate that the PUC will reach a decision on Xcel’s 2023 interim rate increase proposal before the end of 2022.
What happens next?
CUB and other parties to the rate case proceeding filed direct testimony on October 3, 2022. Xcel’s witnesses are now preparing rebuttal testimony, which they will file on November 8, 2022. CUB’s witnesses then have one additional opportunity to respond to that rebuttal testimony in a filing due December 6, 2022. After all the testimony is filed, evidentiary hearings will occur in mid-December. In those hearings, parties’ attorneys will have the opportunity to cross-examine other parties’ witnesses. Then, in March 2023, the judge overseeing this process will file a report with her recommendations for the PUC.
Ultimately, next summer the PUC will decide what Xcel’s final rate increase will be. At that point, if the final approved rate increase is lower than the interim rate Xcel charged in 2022 and 2023, Xcel will need to refund the difference to customers.
What can you do?
If you are an Xcel electric customer and you’re concerned about this proposed rate hike, let the PUC know. Public comments are helpful to bolster the case being made by CUB and other parties. It is specifically helpful to see and hear real-world examples of how Xcel’s rate increase will affect actual individuals and families; unfortunately, it is far too easy for that fundamentally important perspective to otherwise be lost. At this point, the best way to make your voice heard is to:
- Write a comment online or send an email to firstname.lastname@example.org and reference Docket No. 21-630. (Please note that everything in your comment will become part of the public record);
- Participate in one of Xcel’s remaining public hearings on the rate increase. Though several public hearings have already occurred, there are a few remaining in late October and early November. Virtual hearings will be held on October 31, 2022, at 1:30 p.m. and Wednesday, November 2, 2022, at 6:00 pm. An in-person public hearing will also be held in Mankato on November 3, 2022. More details on these hearings are available here.
Finally, here are some immediate resources that can help with your home energy bills:
- Energy Assistance provides grants toward past-due and future energy costs. If you qualify for Energy Assistance, you can also have future utility bills capped at a certain portion of your income through affordability programs offered by some utilities, including Xcel Energy.
- Weatherization Assistance and low-income conservation programs provided through the utility offer free or low-cost efficiency improvements and appliances to qualifying households.
- All customers can get rebates and discounts on energy efficiency measures through their utility.
- Check out CUB’s efficiency tips to save money.
If you have questions, concerns, or would just like to talk with someone to see if there are ways to reduce your energy costs, contact us at 651-300-4701 or email@example.com.
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