Looking into Xcel's 21.2% Rate Hike to Protect Market Share

On Monday Oct 25th, the headline hit the newsstands: Xcel Energy proposes a 21.2% rate increase for electricity.

MPR News: https://www.mprnews.org/story/2021/10/26/xcel-seeks-20-electric-rate-increase-over-three-years

Star Tribune: https://www.startribune.com/xcel-would-hike-residential-power-bills-nearly-20-in-new-rate-case/600109892/

That would be a $677.4 million increase in revenue for them, over a three-year period. Just more than half that amount can be expected to go into effect just next year in 2022 although Minnesota utility regulators softened the interim rate increases sought by Xcel on a December 9th ruling. 

In addition, Xcel is also proposing to raise the guaranteed rate of return it collects from customers to pay shareholders from a current 9.06% to 10.2% per year.

Even by that measure, a rate increase in the neighborhood of 20% is still a bit of a shocker and much higher than usual.

Chris Clark, the President of NSP, Xcel's subsidiary that serves Minnesota and the Dakotas is quoted in the Star Tribune "This is a pretty straightforward rate case. It's really focused on the poles and wires part of our business and making the necessary infrastructure investments."

Xcel is claiming the need to build new high voltage transmission (HVT) line infrastructure. 

It is standard behavior for investor-owned utilities to try to leverage their power to distort transmission system planning in their favor. Building new HVT lines makes it easier for a monopoly to keep new renewables under their market share and fend off competition.

Uprooting the structural inequality behind much of the rate hikes at its source would involve the energy democracy of making the build out of our energy system more of a public decision. Specifically, Xcel or any utility needs to be held accountable to maximize its opportunities to deploy new distributed renewable generation on the low-voltage distribution system, that can be consumed within the footprint of each adjacent substation, before building out new million-dollar-per-mile high voltage transmission lines.

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The existing transmission and distribution system in Minnesota is capable of accepting thousands of megawatts of new strategically sized and located dispersed and distributed wind and solar generation, without building a significant number of new million-dollar-per-mile high-voltage transmission lines. We know this from sophisticated power-flow modeling that fully integrates the higher and lower voltage transmission and distribution networks.


If energy decision makers take an approach of strategically sizing and siting new wind and solar generation to fit within the capacity of each adjacent substation, then we would not need to have quite as many of these new million-dollar-per-mile HVT lines, and the electric generation could be handled in the distribution system. This wisely distributed approach to deploying renewable power may be the most fiscally prudent approach when it comes to Xcel customers.

However, HVT lines is the type of infrastructure that Xcel shareholders get guaranteed returns upon. So, if Xcel committed to accept more community and rooftop solar then they wouldn't have to build out as much transmission infrastructure which wouldn't make their shareholder as much profit.


In addition, locally owned distributed renewables would create both wealth and employment for communities, in a way which we won’t see with renewables under monopoly ownership. Speaking of transgenerational equity, our energy system is more climate resilient and less vulnerable when it is more dispersed and distributed. 


That is the way we could avoid preventable rate increases. Otherwise, we see a split incentive where Xcel Shareholders receive guaranteed profits off of this infrastructure at the expense of customers who would pay more than they need to for energy. 


Requiring Xcel to prove that the new High Voltage Transmission lines are needed is part of the Commission’s role in protecting the public interests as opposed designing the system to make it easier for existing big energy corporations to preserve their market share. 


In addition, The FERC (Federal Energy Regulatory Commission) can provide federal oversight of transmission and has the power to stop them by requiring them to divest transmission assets or allow planning to be done by an independent body.

To put the rate case in perspective:

We have seen this song and dance before many times when Xcel files for a rate increase with the Minnesota Public Utilities Commission (MN PUC), the regulatory panel which rate increases must be approved by. The cycle repeats itself like clock-work 1) Xcel asks for a far bigger rate increase than they could justify 2) The MN PUC eventually gives Xcel about half of what they ask for in the final ruling 3) The Star Tribune and other media then spins it as a "victory for the people" when the PUC does not grant the full increase. 4) Xcel repeats the process of making a high opening offer to get a more lucrative outcome in the eventual compromise. Also, as part of this routine process, Xcel is requesting the MN PUC to approve an interim rate increase of 9.4 % — or $288.3 million – that would start Jan. 1. Because the average rate cases could take up to 18 months to adjudicate, utilities routinely request and are usually granted permission to do interim rate hikes. Customers could possibly receive a refund if the final rate increase is lower than the utility expects, which is usually the case.

On Thursday December 9th, the MN PUC slashed Xcel’s proposed $8.50 per month interim residential electric rate increase down to $5.50. As a result, Xcel will get $41 million less than they had requested, from residential customers.

See: Minnesota utility regulators soften rate increases sought by Xcel By Brooks Johnson Star Tribune DECEMBER 9, 2021


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