CUB fights Xcel’s attempts to raise natural gas rates 

In November 2023, Xcel filed a natural gas rate case in Minnesota, seeking to raise gas revenues by approximately $59 million, or 9.6 percent. If approved, this most recent request would cause residential customers’ gas bills to increase by $6.93 monthly, or $83.16 annually. A portion of this increase has already been implemented on an interim basis: beginning January 1, 2024, the average Minnesota household receiving gas service from Xcel saw their monthly bills increase by about $6 per month. This interim rate increase is permitted under Minnesota law pending a determination of the final rate increase by the Public Utilities Commission (PUC). 

Xcel gas customers may be experiencing deja vu with this latest rate increase. It follows an earlier Xcel gas rate increase implemented just last year. That prior increase caused the average Xcel residential customer’s gas bill to increase about $2.56 per month in 2023.  

This blog post provides a summary of issues CUB is fighting in the current Xcel gas rate case. CUB is pushing back on Xcel’s efforts to increase its natural gas profits and to charge ratepayers for its trade association membership dues. CUB took its first major step in fighting this rate increase through expert witness testimony filed with the PUC on April 19, 2024. 
 

Xcel should not be permitted to increase its profits at the expense of its ratepayers 

In its latest rate increase request, Xcel seeks to increase its authorized return on equity (“ROE”) from 9.57 percent to 10.2 percent. The authorized ROE helps determine the amount of money Xcel is permitted to collect from its customers in order to distribute profits to its shareholders. (At a simple level, the higher the ROE, the more customers pay, and the more shareholders profit.) As a regulated monopoly, Xcel is entitled to a reasonable return, but not an unreasonable one. In a rate case, the PUC is tasked with the difficult job of establishing an ROE that appropriately balances the interests of Xcel’s customers and its shareholders. 

Xcel’s ROE request is significant: it, alone, would increase Xcel’s gas rates by about 9 percent. The request is also bold. The company just agreed to its current ROE as part of a comprehensive and unanimous settlement agreement approved by the PUC last March—just eight months before the present case was filed. Plus, the PUC recently sent Xcel a strong message that a similar ROE request (in an Xcel electric rate case) was too high. In a June 2023 decision setting electric rates, the PUC rejected the company’s request for a 10.2 percent ROE and instead approved a 9.25 percent ROE. Xcel reacted strongly to this decision and appealed it to the Minnesota Court of Appeals. However, Xcel later dropped that aspect of its appeal. In light of these recent developments, Xcel now faces a heavy burden to demonstrate why such a large increase to its authorized ROE is warranted, and how the rate increase required to support it complies with Xcel’s obligation to charge rates that are just and reasonable. 

CUB hired an expert witness to push back on Xcel’s gas ROE request—Dr. Steve Kihm, who also assisted us in Xcel’s last electric rate case. Through his testimony and analysis, Dr. Kihm shows that Xcel’s requested ROE is far higher than is reasonable or necessary for Xcel to provide safe and reliable service. He also shows that Xcel’s request perpetuates an unfortunate pattern of utilities requesting unreasonably inflated ROEs based on an illogical application of finance principles. Dr. Kihm recommends that, instead of a 10.2 percent ROE, a more reasonable ROE for Xcel would be in the 9.0 to 9.4 percent range – a reduction, rather than an increase. We are very confident in Dr. Kihm’s recommendation and analysis and look forward to seeing how it impacts the PUC’s decision. 
 

Xcel should not be permitted to recover membership dues in certain trade associations 

Xcel also seeks to charge customers for the dues it pays to certain membership-based trade associations. Xcel again has the burden to show why charging customers for its trade association dues is reasonable. Though utilities commonly request recovery of these expenses in rate cases, the PUC does not always permit that recovery—particularly when dues payments support lobbying efforts or other political activities more likely to be in the utility’s (or gas industry’s) interest than ratepayers’ interest.  Some state legislatures have banned (or are working on banning) utilities from charging ratepayers for these types of expenses. 

CUB engaged Energy and Policy Institute journalist, Karlee Weinmann, to analyze Xcel’s request to recover certain trade association dues. In her testimony, Ms. Weinmann makes a strong case as to why Xcel’s request to recover $285,084 in annual dues to the American Gas Association (“AGA”) is particularly troubling. Ms. Weinmann highlights several ways in which the AGA’s efforts are aimed at promoting gas usage and/or hindering efforts to increase energy efficiency and beneficial electrification—all good reasons to question why ratepayers should be paying for Xcel’s AGA dues rather than Xcel, itself. Examples of the AGA’s recent activities include: 

• Coordinating and convening “pro-natural gas campaigns” to “ensure a more coordinated and informed approach to these disparate initiatives”;  
• Participating in federal rulemaking dockets and legal challenges to oppose improved energy efficiency standards for appliances;  
• Hiring and deploying consultants to undermine scientific research on the health risks of gas appliances, despite internal awareness of these risks;  
• Mounting efforts to subvert decarbonization efforts in the Inflation Reduction Act, specifically a program that supports homeowners replacing gas furnaces and stoves with electric options;  
• Opposing building code improvements that would help consumers reduce their overall energy use and reliance on fossil fuels; 
• Preparing materials that map out the “opposition,” including environmental non-profit organizations; 
• Hiring social media “influencers” to promote natural gas and sponsoring social media posts as part of AGA’s “#cookingwithgas” campaign; 
• Hosting a dance party to coincide with the annual meeting of the National Association of Regulatory Utility Commissioners (“NARUC”); 

Again, we are very confident in Ms. Weinmann’s testimony and recommendations and believe she makes a strong case for the PUC to disallow rate recovery of AGA dues. 

Get involved 

If you are frustrated about paying increasing Xcel gas rates, there are several ways you can make your voice heard. 

Public Hearings

In the coming weeks, several public hearings are scheduled in Xcel’s natural gas rate case. Any Minnesotan who receives gas service from Xcel can attend these public hearings to share your thoughts with Xcel, other parties involved in the rate case, and an administrative law judge overseeing process to gather and evaluate evidence in the rate case. If you are interested in participating in a public hearing, see the schedule of hearings below, and go here for additional information. 

Written Comments

You can also submit a written public comment to the PUC. Written comments can be submitted online or sent by email to consumer.puc@state.mn.us. All written comments should reference Docket No. 23-413 and should be filed before July 19, 2024. (Please note that everything in your comment will become part of the public record.)  

Track ongoing developments in the rate case

Meanwhile, parties involved in the rate case will have additional opportunities to file testimony, cross examine others parties’ witnesses, and file legal briefs further supporting their recommendations. Keep an eye on the CUB blog for updates as we continue in this process to fight for consumers.