In a ruling on June 1st, the MN Public Utilities Commission granted Xcel Energy a much smaller electricity rate increase than it initially asked for after a coalition of energy equity advocates intervened in the case and testified for affordability.
Xcel initially requested a 21 percent increase request. But the MN PUC ultimately granted Xcel Energy slightly less than half of that- agreeing to a 9.6 percent rate increase (over three years). In terms of total dollar numbers, the MN PUC allowed Xcel to collect an additional $306 million in revenue from its customers over the next three years.
The Just Solar Coalition, founded in 2014, consists of energy justice nonprofits and cooperatives who got directly involved with the rate case such as Minnesota Interfaith Power and Light, Community Power, Cooperative Energy Futures and Vote Solar. It also includes Minneapolis Climate Action, Honor the Earth, the Rural Renewable Energy Alliance, and the Sierra Club. The Just Solar Coalition attained formal status as an intervenor in the rate case and then recruited everyday ratepayers, academic experts, and lawyers to speak to the MNPUC about the impacts the rate hike would have on low-income households and ratepayers of color.
Because MN PUC docket hearings are typically technical and laden with jargon, it usually limits the ability of everyday ratepayers of diverse backgrounds to participate. But some intentional effort from Alice Madden, our energy democracy staff, helped break that usual pre-existing barrier.
It has become standard operating procedure for utility companies to ask for a far higher rate increase than they can justify. So that way, when the state regulators meet them halfway, it can be spun as “a win for the people” while the company gets to collect more revenue anyway. The writing was already on the wall that Xcel would not get their initial 21 percent rate increase request.
It was already lowered to a 15 percent ask as the result of initial docket negotiations. Then in May, prior to oral arguments held before the commission, the administrative law judge who oversaw a public hearings on the rate case last fall released a nonbinding recommendation that Xcel should be allowed a 12 percent rate increase, according to what the Star Tribune reported.
Xcel Energy immediately reacted to the 9.6 percent rate increase by issuing statements that it will reconsider multiple clean energy investments in Minnesota, most notably a large electric vehicle charging initiative.
“The commission’s decision on our recent electric rate case will limit our ability to continue to lead the clean energy transition and may make reaching Minnesota’s aggressive goal of 100% carbon-free electricity by 2040 more costly for our customers and company,” Xcel said in a statement.
Utility companies are different from most other businesses because they get profits guaranteed by the state as a result of being legal monopolies. Going into the rate case Xcel previously had a 9.06 percent guaranteed profit margin (formally referred to as “authorized return on equity”. In this rate case Xcel sought to increase that to 10.2 percent.
In the end, the MN PUC did increase Xcel’s authorized return on equity but only approved a slight increase to 9.25 percent, far less than meeting them halfway.
The fact that Xcel enjoyed a year of earning record profits last year, at $1.6 billion, provided a powerful argument to not only limit its state guaranteed profit margin. That also convinced the MN PUC to place a 15 percent cap on annual incentive-based compensation and to deny Xcel from being able to go forward with a plan to use ratepayer funds to finance an executive level compensation package of $24.6 million.
The company’s CEO, Bob Frenzel, made a salary of over $10.3 million last year, the Minneapolis-St. Paul Business Journal reported.
“This commission is laser focused on affordability and reliability. We scrutinize every dollar to ensure Minnesotans only pay what is necessary,” Commission Chair Katie Sieben said in a statement.