Xcel customers in Minnesota could receive millions in refunds under rate settlement

Customers of Xcel Energy’s Minnesota gas utility could be in line for millions of dollars in refunds if state regulators approve its slimmed-down rate increase request later this year.

The settlement agreement between Xcel, ratepayer advocates and the Minnesota Department of Commerce would see Xcel’s gas utility revenue increase by $37.8 million this year, about $25 million less than initially requested.

Residential rates would increase by 4.1% — half Xcel’s initial request — while monthly service charges will remain unchanged and fees for past-due bills could be capped or eliminated altogether.

Residential, business and industrial customers saw average rates increase 6.8% beginning in January and will receive refunds with interest if the Minnesota Public Utilities Commission approves the settlement. The commission will decide how to handle Xcel’s late fees in a separate decision expected next month in the rate proceeding for the company’s Minnesota electric utility.

The agreement sees Xcel’s authorized return on equity — how much its shareholders can profit from the company — declining slightly to about 9.55%, according to one of the parties to the settlement. The company had asked regulators to increase it from 9.6% to 10.65%. Utilities face growing scrutiny over their authorized returns on equity, which some ratepayer protection groups believe are overly generous to begin with and may fail to fully capture utility profitability.

“While any increase in utility costs is going to be difficult for many people, this settlement is a fair outcome. If it’s approved, customer contributions to shareholder profits will go down, and ratepayers will receive refunds,” Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, said in a statement.

In an announcement posted before the settlement was filed yesterday, Xcel touted recent and planned investments that it said would improve safety and reliability for nearly 500,000 customers in the suburban Twin Cities and pockets of greater Minnesota.

Those include fire detection and suppression upgrades at three gas-fired power plants in the East Metro, an IT modernization project and a transition to more energy-efficient vehicles and equipment, which Xcel said would “ultimately save money and lower the overall cost of operations.”

The settlement allows Xcel to recover some system investment and operational costs from ratepayers but reduces certain amounts in the company’s original request.

A separate fact sheet released by Xcel does not mention the rates it agreed to on Wednesday but says “our average Minnesota customer’s natural gas rates will remain well below the national average” if regulators approve the settlement.

The settlement also requires Xcel for the first time to report expected greenhouse gas emissions from significant planned expansions of its gas delivery system. Those figures would factor into analyses of alternatives to expanding the system.

“The kind of greenhouse gas emission information that will be reported is something that regulators and parties haven’t had access to before, and it’s pretty important for understanding how those projects fit (or don’t fit) with the state’s decarbonization laws,” Levenson-Falk said in an email.

The settlement caps more than two months of negotiations between Xcel, the Department of Commerce, CUB Minnesota and the Suburban Rate Authority, a joint powers organization that represents ratepayers in 29 metro cities. The Laborers’ District Council of Minnesota and North Dakota, an influential labor union, did not participate in negotiations but joined the settlement in support, according to yesterday’s filing.

Minnesota Attorney General Keith Ellison’s office intervened early in Xcel’s rate request but did not join the settlement and will continue to litigate the case, CUB Minnesota said Tuesday.