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Minnesota PUC Grants Interim Rate Hike to Xcel, Suspends Final Decision

December 21, 2015 By Cheryl Kaften

The Minnesota Public Utilities Commission (PUC) approved a $167.3 million, or 5.5 percent, interim rate increase (Docket No. E-002/GR-15-826) for Northern States Power Company d/b/a Xcel Energy on December 10, to be effective on January 1– but rejected, at least for the time being, an incremental interim rate adjustment for 2017 of about $44.9 million , or about 1.5 percent.

The interim increase for the utility’s 1.2 million customers in the state will remain in effect while the PUC considers Xcel’s request for a larger, permanent rate hike of $297.1 million; or 9.8 percent, to be effective January 1, 2018.

The commission generally suspends proposed final rates during a rate case while the company’s application is investigated. The statute provides for interim rates during the suspension period. These interim rates are subject to refund if they are higher than approved final rates.

Because Xcel’s application includes a proposal for a multiyear rate plan and there are other rate cases pending, the commission, pursuant to Minn. Stat. § 216B.16, subds. 2(a),18 2(f)19 and 19(d),20, has the authority to modify the schedule, within a 10-month statutory deadline. Therefore, the commission’s deadline for issuing an order would be March 1, 2017.

Overall, Xcel Energy’s filing proposes several changes in rate design. Within a three-year period (2016-2018) the utility is asking for an increase in residential rates from 8.4 percent (2016), to 10.75 percent (2017) , to 12.59 percent (2018); while commercial and industrial (C&I) non-demand customers would see rate hikes from 4.09 percent to 5.96 percent to 7.67 percent – and demand customers would end up paying 8.16 percent by the final 12 months in the multiyear plan. Lighting customers also would see substantial cost increases, of up to 15.59 percent by 2018.

The PUCO staff commented on the disparity of the rate allocation, noting that, although “the residential class consumes only 28 percent of total energy sales, Xcel apportioned it nearly half 94.5 percent of the total revenue increase; conversely, while the C&I Demand class consumes 69 percent of the total energy, it is allocated only 49 percent of the total revenue increase.”

Chief among the costs contributing to the requested rate hike are capital-related expenses for nuclear generation ($57.5 million). Now, regulators are focusing in on those nuclear costs.

Indeed, in an unexpected move on December 10, The Star Tribune  reported, the utilities commission ordered Xcel to show its cost projections over time for upgrades to its Prairie Island nuclear power plant in Red Wing, Minnesota. Xcel intends to invest $891 million in the twin-reactor plant from 2016 through 2018, on top of $1.7 billion invested since 2012, according to a November regulatory filing.

“These costs are enormous, and I want to be sure that the commission and all the parties have a full opportunity to examine what is going on here,” commission Chairwoman Beverly Jones Heydinger said.

In addition to the nuclear costs, there are other factors driving its request, Xcel said earlier in November. “Our capital investments in transmission, distribution, and generation [represent] by far the largest component. … In addition, our rate request reflects certain carry-forward items related to our last electric case, including the … tools used to moderate rates in 2014 and 2015. The combination of these factors, as well as the need to address increases in our normal business costs, leads us to file this case.”

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