Xcel Energy asked for its largest-ever Minnesota electric rate hike on Monday but offered ways to soften the pain, including spreading it over two years.
The increase of $291 million is slightly more than what Xcel sought in its 2013 rate-hike request, which utility regulators slashed by two-thirds. This time, Xcel proposed smaller, single-digit increases over two years for its 1.2 million electric customers in Minnesota.
"We are asking to moderate the increase on the front end," said Chris Clark, regional vice president for rates and regulatory affairs.
Customers face a 4.6 percent interim increase in January, followed by a second interim hike of 5.6 percent a year later. By law, utilities have a right to charge interim rates while the state Public Utilities Commission decides on permanent rates. If the final rates are less, Xcel must refund the difference with interest.
The 2014-2015 rate hikes will be Xcel's sixth and seventh increases since 2005, driven by a wave of capital investment in nuclear power plants, transmission and distribution lines and other projects including new wind farms.
"It truly reflects an investment cycle," said Xcel's Minnesota CEO Dave Sparby, who compared it to the period of rapid investment in the 1960s and 1970s when the company's two nuclear power plants were built in Minnesota. "At this point those [nuclear] investments are being repowered and refurbished. We cross through that investment peak in 2016."
Yet even after that, Xcel executives said they see a need for perhaps three additional annual rate hikes, from 2016 to 2018, but at levels below those proposed Monday. Those requests would be filed in late 2015, they said.
If the full 2014-2015 rate hikes take effect, the average Xcel residential customer would face an average increase of $10.29 per month or $123 per year, the utility said. Regulators, on average, have reduced Xcel's rate requests by half in four rate cases since 2005.