6.1a1 ERMUSR 06-13-2023Xcel will reassess investments in Minnesota after regulators' rate hike de... https://www.startribune.com/minnesota-regulators-approve-9-percent-th...
BUSINESS
Xcel will reassess investments in
Minnesota after regulators' rate hike
decision
Regulators approved a 9%, three-year rate increase, much less than
Xcel had requested. The state's largest utility says it will ask for a
reconsideration of the decision.
By Mike Hughlett (https://www.startribune.com/mike-hughlett/6370445/) Star Tribune
JUNE 1, 2023 — 6:12PM
Xcel Energy said it will reconsider significant investments in Minnesota after state
regulators on Thursday approved a three-year rate increase that was much less than
what the the state's largest utility wanted.
The Minnesota Public Utility Commission (PUC) approved the $306 million — or 9% —
increase, which also was less than the state Department of Commerce and an
administrative law judge recommended. Xcel was most recently asking for $440 million
over three years.
Xcel "is still getting an increase in rates, and they need that to provide reliable and
efficient service," PUC Chair Katie Sieben said in an interview after the vote. "I wasn't
convinced they needed as big an increase as they were proposing. The commission struck
a good balance."
In a statement, Xcel said it was "extremely disappointed with the commission's decision,
which will limit our ability to continue to lead the clean energy transition for our
customers."
Xcel said it will ask the PUC to reconsider its rate decision. The PUC usually rejects such
reconsideration petitions, and petitioners then often take their beef to the Minnesota
Court of Appeals.
Xcel said that in the wake of the PUC's decision, it will re-evaluate its planned
investments in "a cleaner, more reliable system for our customers."
JASON WACHTER. ASSOCIATED PRESS
Xcel customers will see their bills increase, but
not as much as the utility wanted.
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The utility filed a petition late Thursday asking the PUC to withdraw its $330 million
Clean Transportation Portfolio proposal. The centerpiece of that plan would have Xcel
building and owning 730 electric vehicle fast chargers in Minnesota
(https://www.startribune.com/xcels-plan-for-largest-u-s-utility-owned-chargi_g-
network-sparks-strong--oposition/600256296/)_, which would make the state home to
the largest utility -owned charging system in the country.
While the $192 million EV charger proposal has garnered praise for filling the state's
charging gap, it has been roundly criticized by the EV charging and gas station industries,
as well as the Minnesota Department of Commerce and many Xcel ratepayers, who
would eventually pay for it.
Xcel had dropped its rate request to $440 million from $498 mhllion late last year
thtt s://www.startribune.com/state-agencies-oppose-IMm-xcel-rate-increase-for-2023
/600233141n and well below its initial request of $677 million, which would have
amounted to a 21% increase.
The biggest difference between what Xcel wanted and what Xcel got pivoted on the
company's return on equity (ROE). Return on equity is a key measure of profitability,
and the PUC granted Xcel an ROE well below what it requested.
Minneapolis -based Xcel, which has about 1.3 million Minnesota customers, says it needs
the rate increase for a variety of purposes such as basic upkeep of its system and to
improve its distribution grid and pay for projects to further "the clean energy transition.'
The company's three-year rate proposal came at a time when consumers were already
buffeted by rising inflation of all sorts, particularly for energy and food.
"Any rate increase is difficult for people," said Annie Levenson -Falk, head of the Citizens
Utility Board of Minnesota (CUB), a ratepayer watchdog group.
That said, she said CUB "was pleased with the outcome" of Xcel's rate case. "I think the
PUC looked really hard to make sure ratepayers don't have to pay more than what they
should to support the company's profits and its executive compensation."
The PUC denied Xcel's request to approve long-term executive compensation expenses
of $24.6 million over three years. Instead, the PUC approved a 15% cap on annual
incentive compensation for individual pay.
The PUC also approved far less than the $68 million in insurance premium costs that
Xcel had wanted to include in its rate increase; and the commission rejected Xcel's
request to include several million in company pension contributions in its rate base.
The Minnesota Commerce Department, which represents ratepayers before the PUC,
had recommended that Xcel get $325 million over three years.
Administrative Law Judge Christa Moseng concluded (https://www.startribune.com
/administrative -law -judge says-xcels-rate-increase-request-should-be-lower/600264815/)
in April that Xcel should get $384 million over three years. Such judges are often
appointed to contentious PUC proceedings, but their rulings are non -binding.
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"I think the ALJ report is thorough and the findings are well grounded," PUC
Commissioner Valerie Means said at Thursday's hearing. While the PUC adopted many
of the ALJ's findings, it did not on one critical point — Xcel's allowed return on equity.
Xcel argued its guaranteed ROE should be raised from 9.06% to 10.2%, saying it needs to
be competitive with other utilities in capital markets. Moseng found that 9.87% is a
"reasonable" return for Xcel.
Commerce has said that Xcel has been "flourishing" at its current ROE, though an
increase to 9.25% was merited. CUB, the ratepayer watchdog group, has recommended
that Xcel's ROE be lowered to 8.8% to 9%.
The PUC adopted the Commerce's Department recommendation by a vote of 3-2.
"I am comfortable with the department's solid analysis," said Commissioner Matt
Schuerger, who along with Sieben and Commissioner John Tuma voted for the 9.25%
ROE.
Two commissioners, Means and Joe Sullivan, argued that Xcel's ROE should have been
set at 938%. Sullivan argued that the 9.25% is "dated," and that financial markets have
since "deteriorated a bit" while interest rates have risen — all warranting a slightly higher
ROE for Xcel.
The PUC Thursday also reduced Xcel's monthly basic service charge to $6 for residential
and customers. That rate has been $8 to $10 per month.
However, Xcel said in a statement that customers' kilowatt -per -hour energy charges will
go up to compensate for the lower fixed monthly charge. "This shift disproportionately
increases rates for households with large families," the company said.
CUB's Levenson -Falk said the lower monthly charge will have a positive impact. If
consumers conserve power, the lower fixed charge "makes the savings more meaningful,"
she said.
The PUC also approved a discount rate for low-income households with low energy
usage. Xcel and several other parties favored this new program.
The discount will affect about 100,000 Xcel customers, said Catherine Fair, head of St.
Paul -based Energy Cents Coalition, a nonprofit advocacy and assistance group for low-
income utility customers.
The discount will be up to $14 per month for qualified customers, she said.
Mike Hughlett covers energy and other topics for the Star Tribune, where he has worked since 2010.
Before that he was a reporter at newspapers in Chicago, St. Paul, New Orleans and Duluth.
mike.hughlett@startribune.com 612-673-7003
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