Published April 6, 2023
On March 23, 2023, the Minnesota Public Utilities Commission accepted a settlement that increased rates for Xcel Energy’s natural gas customers. The agreement was negotiated by the company, the Department of Commerce, the Office of the Attorney General, the Suburban Rate Authority, and a group of clean energy organizations (Fresh Energy and the Minnesota Center for Environmental Advocacy). As a result of the settlement, residential customers should expect their bills to increase by about $2.56 per month as compared to before the company filed its rate case. It is important to note that this rate increase is separate from any changes in the cost of gas, which are passed onto customers at market rates without a markup.
Instead of Xcel’s requested $35.6 million increase, the settlement raised natural gas revenues by $20.9 million, or 2.7 percent. The resulting increase in rates is less than the interim, or temporary, rates that Xcel was charging throughout 2022 while this case was still pending. As a result, Xcel will be required to refund customers for the $3.98 million difference between interim and final rates. Xcel had also requested to increase residential customers’ monthly fixed charges to $11.00, but the settling parties agreed to keep the current monthly charge of $9.00.
In addition to increasing revenue, the settlement set Xcel’s return on equity at 9.57 percent for its natural gas service. This is lower than the 10.50 percent that Xcel had originally requested. The return on equity determines the amount of profit earned on the company’s investments and can have a significant impact on customer costs. Because customers pay for Xcel to earn this profit, a lower return on equity reduces the rates charged to Minnesotans.
In summary, the Commission’s approval of the settlement agreement will increase residential rates, but not nearly as much as originally requested. The overcollection of 2022 interim rates will be refunded back to customers as a credit on their bills.
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