Published December 22, 2020
Last Thursday, the Minnesota Public Utilities Commission (PUC) approved an arrangement that will avoid a rate increase for Xcel Energy’s residential customers in 2021.
This fall, Xcel filed a “rate case” — a request to increase their base rates by 20 percent — with the PUC. At the time of filing, though, Xcel said that they preferred an alternative to stay out of a rate case for another year by “truing up” customers’ rates, keeping the company’s revenues consistent while accounting for lower-than-expected sales.
Under the true-up proposal, the main rate rate increase would fall on large commercial and industrial customers to offset declining sales from that class of customers. Sales to residential customers, on the other hand, have increased as people have stayed home during the pandemic, and residential customers would see a small refund under the proposal. Rate cases involve detailed litigation before a judge and typically take at least 12 months to complete, while the true-up proposal could be completed by the PUC in a single hearing.
Advocates for residential and small businesses, including the Attorney General’s Office and the Energy CENTS Coalition, supported the stay-out proposal. Representatives of large commercial and industrial customers opposed it and asked the PUC to move forward with Xcel’s rate case. The state Department of Commerce argued that Xcel shareholders should cover a portion of the cost of Xcel’s true-up proposal for large customers.
Through three days of questioning and deliberation, the PUC sought a solution that avoided a rate increase for residential customers — particularly important during the pandemic — while reducing the impact on large customers.
Xcel offered substantial compromises and the commission eventually settled on a package under which Xcel agreed to withdraw its rate case. Beyond its initial proposal, Xcel agreed to cap its earnings and not earn a return on equity higher than 9.06 percent. In addition, Xcel shareholders will cover the entire $17.5 million cost of a proposal to forgive past-due bills of those customers who are the farthest in debt, rather than passing costs to ratepayers. Shareholders will also bear the costs of bad debt: overdue bills that will not be paid back due to the pandemic, currently estimated at $20 million.
Residential customers can expect small credits on their electric bills next year. Base rates — the basic service charge and energy charge per kilowatt-hour — will remain unchanged. (Other line items on electricity bills, however, could still be adjusted throughout the year.) Xcel expects to return with another rate increase request for the start of 2022.