Xcel asks to hike electric rates by $677 million per year

Published November 1, 2021

Xcel Energy is asking state regulators to charge its Minnesota electric customers an additional $677 million each year, increasing revenues by 21.2% over three years.

Xcel’s rate increase request must be approved by the Minnesota Public Utilities Commission (PUC), and utilities almost never get the full increase that they ask for. Xcel’s request will go through a rate case: a one- to two-year process through which CUB and others can look under the hood at how Xcel wants to use its customers’ money — and how much revenue is actually justified.

Xcel electricity customers can expect to pay an interim rate increase of as much as 9.4% beginning January 2022 and continuing while the rate case is underway, with a possible increase in 2023. If the final approved rate is lower than the interim, ratepayers will receive refunds with interest. The amount of the interim rate increase should be set next month. 

The context

Before getting into this request, let’s consider the broader picture. 

One in eight residential Xcel customers is already behind on their bills. Meanwhile, heating costs are way up, housing costs are up, and consumers are facing inflation across the economy. 

In addition to the base rate increase, Xcel customers can also expect to see high natural gas prices drive up the fuel cost line on their bills, and Xcel may pursue increases in other line items (also known as riders) through separate proceedings.

A rate increase of any amount will be difficult for many people – and 21% is a very, very large request. 

At the same time, Xcel as a company continues to profit. Xcel’s CEO was the eighth highest paid executive in Minnesota last year, and the company has the second highest CEO-to-median-worker pay ratio among US utilities (139 to 1).

Xcel’s request

You may hear that renewable energy and transmission investments are one factor behind the requested increase, and that is true. However, Xcel would cut customer costs by pursuing more renewables and helping customers convert from fossil fuels to electricity, and many other factors drive this rate case.

Xcel, like many utilities, has aging infrastructure and needs to make investments, and ratepayers rightly pay the cost to generate electricity and get it to people’s homes and businesses. Xcel is pursuing renewable energy (though it would benefit ratepayers to do more). Xcel simply needs to update and expand its infrastructure, and building more fossil fuel resources rather than renewables would cost customers even more. 

However, there is a lot more to this rate increase request than simply tallying the costs of Xcel’s investments.  

For example, Xcel also wants to increase the return on equity for its shareholders to 10.2% — a drastic jump up from its current authorized return of 9.06%. It also wants to increase its rate base: the amount of spending on which it earns this return. 

The rate case will allow for a careful look at Xcel’s expenses and investments; depreciation costs; taxes; and the allocation of costs among residential, commercial, industrial and other classes of Xcel customers.

What’s next

CUB intends to formally intervene in the rate case, and we are just beginning to dig into the thousands of pages filed by Xcel. There will be opportunities for public comment. We will keep you up to date as the case progresses. 

If you are concerned about your bill, here are some resources to help.

If you have questions, concerns, or would just like to talk with someone to see if there are ways to reduce how much you spend on energy costs, contact us: 651-300-4701 or info@cubminnesota.org.

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Author: Annie Levenson-Falk

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