Minnesota Xcel Energy customers will see bump in electric bills by November

Residential customers of Xcel Energy in Minnesota later this year will see a small increase in their electric bills along with a one-time refund under a rate structure approved Thursday by state regulators.

It's the seventh electric rate hike for the utility's 1.2 million customers since 2006 — and more increases could be down the road.

The state's largest power company says it plans to file another, multiyear rate case for 2016 to recoup continuing investment in its generating plants, transmission lines and distribution network.

The latest increase for residential customers will boost electric rates slightly more than 1 percent. That's on top of the 4.6 percent interim rate hike that took effect in January 2014. All together, residential rates are up about 6 percent from two years ago.

"It was not what we had hoped — it was a compromise," said John Coffman, an attorney for AARP Minnesota, which represents older people and had intervened in the case on behalf of consumers in Xcel's rate case.

Although the Minnesota Public Utilities Commission in March approved Xcel's back-to-back rate hikes for 2014 and 2015, some key financial details required further study. That left in doubt until Thursday how much rates would go up.

Customers also are due a refund, with interest, because the 2014 interim rates exceeded what regulators authorized Xcel to collect that year. On Thursday, regulators estimated the average residential refund will be $17.

In a major victory for AARP, environmental groups and others, regulators earlier rejected Xcel's request to raise the $8 monthly basic rate, which customers pay regardless of how much power they use. Consumer and environmental advocates argued that any increase would penalize those who use the least energy.

Aakash Chandarana, Xcel regional vice president of rates and regulatory affairs, said the permanent rate increase and one-time refund likely will show up on October or November bills. If Xcel files a 2016 rate case later this year, it likely would mean another interim rate hike effective in January.

The Legislature recently authorized investor-owned utilities to seek five years of rate increases at once. Chandarana said Xcel hasn't decided how many years its next rate case will cover.

Some of Xcel's investments, including recent, life-extending upgrades to two nuclear power plants and construction of three company-owned wind farms, will help Xcel reduce carbon emissions, he said. Xcel has also said that the price of power from the new wind farms will be less than the cost of buying fuel to burn in existing power plants, saving customers money in the long run.

In an interview, Chandarana said one investment on the horizon is upgrading Xcel's distribution network to accommodate localized power sources like solar farms.

"We are trying to make sure we are making the right investments for our customers," he said.

In setting the final rates, the commission rejected requests by two state agencies to put a greater share of the rate hike burden on business customers. Under one scenario, large industrial customers could have seen a nearly 7 percent increase, including the interim rate hike. Instead, regulators kept that increase to just under 6 percent, which is closer to the cost of serving them.

Xcel asked regulators to reconsider some of its earlier rulings that reduced its overall rate hike. But the commission rejected those appeals, including one related to cost overruns at the Monticello nuclear power plant upgrade.

David Shaffer • 612-673-7090 • @ShafferStrib