Xcel seeks 9.8 percent electric rate hike in Minnesota over three years

Electric bills of Xcel Energy customers in Minnesota are going up — again.

The state's largest power company on Monday requested a 9.8 percent electric rate hike phased in over three years. By 2018, a typical electric customer's annual electric charges would be $132 higher if state regulators approve the increase.

Xcel's 1.2 million Minnesota electric customers face an almost-certain interim rate hike of 5.5 percent in January, or about $60 per year, plus a smaller bump in 2017, bringing the total to 7 percent. Interim rate hikes are almost always approved but are subject to refund if the final authorized increase is less.

The next increase will follow five consecutive years of rate hikes by the Minneapolis-based utility, and consumer advocates said it is too much for people with stagnant incomes.

"So many things are going up but it's not reflected in people's wages," said Rick Tallman of Rockville, Minn., who recently started an advocacy group, Citizens for Fair Utility Rates, mainly to fight higher fixed charges on customers trying to conserve energy. "It really puts a person in a bind."

Xcel is proposing to increase the residential basic charge, which all customers pay regardless of power usage, from $8 to $10 per month. Xcel said that increase would bring the basic charge in line with the cost of service.

But AARP, the advocacy group for older people, and other consumer interests successfully fought Xcel's last effort to raise the basic rate, and that battle looms again.

"It's a 25 percent increase in that portion of the bill," AARP Minnesota Director Will Phillips said. "That is the portion of the bill that consumers have no control over. Regardless of usage, that is what they pay and it continues to be a bit of a rub for people."

Xcel said the major drivers of the request are upgrades to the power grid and nuclear power plants, investments in cleaner energy, higher property taxes and normal business cost increases. About half the investments have been made but not yet recovered in rates, Xcel said.

The utility said the investment cycle fueling recent rate hikes is winding down, and the 2017 and 2018 increases would be less than the projected rate of inflation. By offering a multiyear rate plan, customers get some predictability on electric rates, the company said.

"It's not zero, but it is down more toward the rate of inflation, in fact below it," said Laura McCarten, an Xcel regional vice president.

The new rate hike request also includes $103 million to address accounting shifts used to moderate Xcel's last rate hike. In effect, customers are being called on to pay in 2016 and 2017 for rate relief in the prior two years.

Since the Great Recession, Xcel and other utilities have experienced flat or declining growth in power sales and revenue. Sales growth once cushioned customers from some effects of long-term investments. But declining power use per customer is flattening Xcel's revenue even when it adds customers — a trend Xcel says is bound to continue with emerging energy-efficient technologies.

"We are aware of the impact of recent rate increases on our customers, especially the impact of these increases on our low-income customers," Aakash Chandarana, Xcel regional vice president for rates and regulatory affairs, said in testimony filed with state regulators.

Xcel wants to up funding for low-income energy assistance programs from $11 million to $14 million a year and expand eligibility for seniors and those with chronic or severe medical conditions who don't currently qualify for utility, state or federal energy assistance programs.

It is the first time any Minnesota utility has sought a three-year rate hike, an option made possible by a 2015 change in state law that Xcel supported at the Legislature.

The rate-hike request to the Minnesota Public Utilities Commission is likely to take 18 months to review. On average, regulators have cut Xcel's four most recent rate hike requests by 55 percent amid pushback from business and consumer groups and state agencies representing ratepayers.

Altogether, Xcel seeks a $297 million permanent increase in rates over three years. For any single year in the period, the biggest request is for $195 million or 6.4 percent in 2016. That ranks as the second-largest one-year rate hike Xcel has ever requested.

For 2017, Xcel seeks an additional boost of $52 million or 1.7 percent, followed by another $50 million or 1.7 percent in 2018. The utility also offered regulators the option of rolling out rate hikes over a five-year period, reducing the impact in 2016 and other years.

Xcel has raised Minnesota electric rates each year since 2011. With the latest request, that string would be extended to eight in a row. Xcel also raised rates in 2006 and 2009.

The most recent regulator-approved increase, for 2014-2015, was 5.3 percent overall, and slightly more for residential customers because of the higher cost of serving them. But that two-year increase of $149 million was half what Xcel requested.

Because regulators pared back that request, Xcel customers overpaid for electricity in 2014 under an interim rate hike and will get a one-time refund with interest in December or January. Xcel said it will be just under $20 for a typical residential customer.

If Xcel wins approval for its requested permanent rate hikes through 2018, the total increase for a typical residential customer averaging 675 kilowatt-hours per month would be $11 per month or $132 per year, according to the filing.

David Shaffer • 612-673-7090 Twitter: @ShafferStrib