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North Dakota PSC Settles with Xcel on Multi-State Rate Allocations

March 16, 2016 By Cheryl Kaften

The North Dakota Public Service Commission (PSC) approved a comprehensive settlement agreement on March 9 with Northern States Power, a subsidiary of Xcel Energy, that is expected “to resolve all outstanding issues on cost allocation for new resources developed in Xcel’s system,” the parties said.

The decision results from a 2014 case under which Xcel agreed to find a way to allocate its costs more equitably across its eight-state service area, in recognition of the fact that charges associated with Minnesota energy mandates “may not be prudent to North Dakota consumers.”

Under the terms of the new settlement, North Dakota base electric rates will be set in stone through 2017 and the timeline under which Northern States Power will build a natural gas-fired power plant in the state has been accelerated, with a completion date of 2025 instead of 2036.

“Today’s settlement strikes a balance between protecting North Dakota ratepayers and making sure we have a reliable regional energy grid, while acknowledging that individual states have a right to set their own state energy policies,” said PSC Commissioner Brian Kalk.

Indeed, according to the advocacy organization Watchdog. org, “For years, Xcel has spread the cost of Minnesota’s renewable energy requirement to the utility’s customers in five neighboring states. North Dakota officials grudgingly looked the other way as Minnesota regulators continued to approve more of what they viewed as inefficient renewable energy projects. Those projects increased the utility bills of Xcel’s [90,000] customers — from Fargo to Minot — by an estimated $5.7 million a year.”

Specifically, the parties have  agreed that:

  • Xcel will build or have located in eastern North Dakota a natural gas-fired electric generation facility with a capacity of at least 200 megawatts (MW). The turbine will be treated as an Xcel system resource and will be allocated to all states and customers served by the Xcel system.
  • North Dakota customers will not have to pay for 15 community based energy development projects and two small solar purchase power agreements (PPAs) being implemented as Minnesota-driven alternative energy projects.
  • The proportional share of the cost of six key biomass purchase power agreements and two wind projects will continue to be recovered in North Dakota. The biomass resources will provide about 145 MW of baseload-type capacity to the entire Xcel system and the two wind projects will provide low-cost energy, thereby reducing overall system costs.
  • A rate freeze will be put in place for base electric rates until at least 2018.
  • A mechanism will be developed to deal with different state energy policies

“This settlement agreement delivers three big wins for North Dakota Xcel customers,” said Commission Chairman Julie Fedorchak. “It prohibits a general rate increase for two more years, secures a commitment to gas-powered generation to strengthen reliability in the Valley by 2025 , and it eliminates from our rates a number of costly experimental energy projects driven by Minnesota policymakers.”

“While regulators in some states are determined to impose arbitrary costs on these multi-state power companies, this order shows that the North Dakota PSC is just as determined to make sure our citizens do not have to pay those costs,” said Commissioner Randy Christmann.

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