Xcel's Rate Increase Public Hearing- interesting observations

    A public hearing about Xcel's 10.4% rate increase proposal was held at the Sabathani Center in South Minneapolis on the night of June 23rd. The public testimony by number of people speaking was overwhelmingly against Xcel's rate increase proposal as it stands. A robust presence by the Sierra Club was joined by an even greater number of speakers who were seniors or fixed income ratepayers.

As the testimony went on, a recurring point about the rate increase was emphasized. It is how the Mall of America and large corporations will get a lower rate than residential ratepayers who have a much tighter budget. Speaking of the Mall of America, one of the speakers testifying had observed lamps on the Mall of America running all day when they are totally not needed; making a point about easily preventable energy waste from commercial entities who can more easily pay for energy.

Click Here to see a TV news broadcast on the story saying that if the rate increase goes through 25% would be invested into existing power plants. There is additional coverage in the Star Tribune Here

There were at least 6 speakers were representing major organizations.

 1: Chris Clark, Xcel Energy Regional Vice President of Rates and Regulatory Affairs, attributed a great deal of the need for a rate increase to the upgrading the Monticello nuclear plant to make “carbon free” energy available for 20 years as well as the necessary investments into keep the grid robust and reliable. 

 2: Sue Pierce, a rate analyst with MN Department of Commerce, concluded that 60% of Xcel's rate increase should be rejected. She recommend reductions in Xcel's proposed costs of capital. The department basically accused Xcel of overstating it's projected revenue shortfall and costs, including employee benefits and property taxes. The Commerce Department's only recommendation in favor of a 2015 rate increase is for the needed capital investments in Xcel's system and only to the extent that the capital improvements are made. She spoke in favor of decoupling utility earnings to electric sales in order to encourage energy conservation. More details can be read in an article Here  

 3: Ron Nelson, a utility economist with the Attorney General's office, agreed the rate increase proposal was excessive and would hurt homeowners. He recommended many adjustments such as not including so many cost overruns and corporate jet expenses into the rate hike. He recommends keeping the basic charge to stay at $8.

 4: Seth from AARP emphasized how the size and frequency of rate increases and the manner which they are collected is a big priority for AARP. He pointed out how small users are disproportionately impacted and should be better rewarded for conservation efforts.

5: Jessica from the Sierra Club spoke spoke in opposition to Xcel's proposed customer charge increases that disproportionately effect low-income consumers and in favor of Block Rate Pricing and decoupling for Xcel energy. Both of the latter approaches would do a far better job at encouraging energy efficiency. The Sierra Club issued a position in favor of Xcel getting a reasonable rate of recovery to reward investments in wind, solar and energy efficiency.

6: Todd Klingel, president of the Minneapolis Regional Chamber of Commerce was the only speaker besides Xcel in favor of the proposal. However he spoke most directly in favor of Xcel in general and comparatively indirectly about why rates should increase. He Said

* Xcel is one of the most reliable utilities for businesses who can't afford any down time in electricity supply

* Xcel is legendary in crisis response (invoking the June 21st storm last year)

* Xcel has fair and consistent pricing below the national average;

* Xcel is the number one wind energy provider and he was pleased with pleasing solar efforts.

It is worth considering how the Minneapolis Regional Chamber of Commerce is the organization which represents industrial and large business customers who will shoulder a smaller proportion of the rate hike in comparison to residential users. In addition to providing general praise for Xcel, he justified the rate increase with a couple of overarching principles that “people take energy for granted” and “how to supply energy requires long-range planning decades out.” Todd Klingel left shortly after speaking and did not hear the rest of the speakers' testimony.

Here are some of the messages from additional speakers who testified, in no particular order:

1: A volunteer for two economic justice groups told a narrative where many among the working poor who finally get a step higher in salary will see their new gains canceled out by higher electric bills; an increase that for more affluent people would only be a minor brush off. She stated that “The Sierra Club's written summary spoke to me”. 

2: Another speaker on fixed income told how she followed through with implementing a great number of the energy saving recommendations suggested in Xcel's literature such as new storm windows and new lights. She later asked a question to directly whether if it is still worth doing such home energy efficiency work if Xcel is only going to raise the rates anyway. Chris Clark of Xcel responded that the investing in more home energy efficiency still makes sense because the electric system as a whole is better off due to displacing need for new power plants in addition to individual customers being better off.

3: A member of the Sierra Club who negotiated with Xcel on the value of solar tariff applauded Xcel for conservation improvement programs which were forced upon them by state policy. But then he pointed to what he saw as Xcel's antiquated business plan that does not suit energy security which needs distributed energy. He had seen pushback from Xcel and brought up their attempts to put limits on community solar as an example. 

4: A rousing speaker pointed out how ridiculous it is for us to build new stadiums and buildings with ancient technology in the 21st Century. New construction permits should require renewable energy availability and accessibility with Bethel University setting a good example. This speaker advised the audience “Don't keep pointing the finger at Xcel- go to elected officials.”

 5: A low-income ratepayer had a $500 dollar electric bill while on the budget plan. She called Xcel and their answer was the winter was really bad so she had to set up payments.

 6: A thought leader behind the Minneapolis Energy Options campaign emphazised we have to make drastic changes and willingness to produce local energy is what has to happen.

 7: Another speaker drew attention to innovation around the distribution edge and the entrepreneurial selling of energy services as a way utilities could build a revenue stream that is not dependent on rate increases or raw amount of KWH sold. He then mentioned urgency that oil, gas and coal supplies will inevitably peak and then the costs of these fuels will spike. Because of the utility pass through, the costs posed by a fuel price spike will be passed on to captive ratepayers rather than being absorbed by utility shareholders, setting the stage for a far more painful utility bill in the future. He suggested we can prepare for this by communicating information information about wise-incentived rate structures, energy efficiency programs and how to access to resources to reduce consumption; all of which will require some community-based social marketing.

 8: One speaker pointed out how in 2011 Xcel spent $2.36 million in lobbying topping the Chamber of Commerce which spent $2.06 million lobbying. Another speaker echoed on those figures suggested a better approach would be transferring the amount Xcel spends on lobbying and transferring it to public educational outreach programs that would prevent rate hikes.

 9: An incisive point was brought up how the total pay of Xcel CEO Ben Fowke went from 9.7 Million in 2011 to $11 million in 2012 to $15.7 Million in 2013. This was followed by a question posed to Xcel as whether their front line workers are also getting a salary raise as the result of rate increases.

 10: Toward the end of the public testimony the inevitable question was brought up in a direct way: “What is it about residential ratepayers that makes the corporate people pay less?” Chris Clark of Xcel explained the costs of serving these different classes of customers. His answer fell along the lines of commercial customers having a more even load that has a lesser need at peak load hours and acknowledged the explanation was complex. This implication that energy costs to a utility are in flux, led to an additional question of whether we can have real time energy pricing. That way residents as a whole could use more energy when it is cheapest for the utility and that this could be used as a bulwark against rate increases.

 

To conclude- there is an obvious pattern taking place in recent years: The utility asks for twice as much as they can justify in their rate increase proposal in anticipation of getting about half of it from the PUC. In that way, it can be labeled as “a victory for the people” or as a “fair compromise.”

 

 

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