Xcel is pushing for rate hike. Here's what it could mean for your bill
A sign outside Xcel Energy’s Prairie Island Nuclear Generating Plant along Wakonade Drive gives directions for visitors at the plant, located within Prairie Island Indian Community in Welch, Minn., seen on Thursday, June 30, 2022.
Tom Baker for MPR News file
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NINA MOINI: Xcel Energy customers could see their electric bills jump by an average of $13 a month, next year. That's if state regulators approve the rate hikes the company is proposing, 9.6% for 2025 and another 3.6% for 2026. Xcel, which is Minnesota's largest electricity provider, says the higher rates will fund investments in reliability, clean energy, and its nuclear plants, and help prepare for higher energy use in the future, that demand.
The Public Utilities Commission, which is the board that regulates utilities in Minnesota, is holding meetings around the state this month to gather input. My next guest advocates for utility consumers as the leader of a group called Citizens Utility Board, or CUB. Annie Levenson-Falk joins me in the studio. Thanks for being here, Annie.
ANNIE LEVENSON-FALK: Yeah, thanks for having me on.
NINA MOINI: This is another thing that really impacts so many people across our state. So I really appreciate you being here to talk about this. And I didn't even realize, or people may not realize, that utilities like Xcel need approval from the state to raise their rates. Can you talk a little bit about how that process works?
ANNIE LEVENSON-FALK: Yeah, that's right, because utilities in Minnesota are monopolies and you don't have a choice in your electric provider, most of them, the largest ones have to get approval from a state board called the Public Utilities Commission. So that's all of the investor-owned, the for-profit utilities, have to go to the PUC. So they file their request for a rate increase, which Xcel has done, and the PUC will organize a process to gather public input and expert analysis on that request and then make a final decision.
NINA MOINI: All right. Yeah, no, that's good context. So what's your understanding, Annie, of why Xcel is proposing this rate hike? What are some of their main reasons?
ANNIE LEVENSON-FALK: Yeah, you just listed some of them, modernizing the grid, replacing old infrastructure. The power plants are pretty old, and they need to be maintained or, in some cases, replaced. And they're being replaced with clean energy, which in a lot of cases is the most cost effective. But that's not to say there's not a cost to that. There still is. So there's investment that's needed in the system. There's general increased costs of business that everyone is familiar with. But another major portion of this is a request for hirer return for their investors. So that constitutes actually about 1/3 of their request is just a request for a higher return on equity for the utility.
NINA MOINI: And another thing that I was hearing about that I thought was sad, maybe it's a sign of the times, but that there's been a surge in shutoffs due to failed payments just because people are really struggling. What are you hearing about that?
ANNIE LEVENSON-FALK: Yeah, as a ratepayer advocate, we spend a lot of time trying to understand the state of affordability for Minnesota households. And there are some real red flags. Xcel, in particular, has really increased shutoffs. They've been skyrocketing over the past couple of years. There was more than 50,000 Xcel households were shut off last year, and they're on pace to match or exceed that in 2025.
NINA MOINI: What have you been doing to advocate around this? Amidst all of that, this idea of a rate hike, how do you balance all that?
ANNIE LEVENSON-FALK: Yeah, and that's something that the PUC is going to have to take into consideration when they look at the rate hike. They're going to look at, first of all, has Xcel presented evidence that they need the money? But also, what's the effect going to be on Minnesotans? And there's been an enormous showing of public concern about this. There have been almost $7,000 public comments filed, which I've never seen before. And the vast majority of those expressed concern with the rate hike.
So the Citizens Utility Board is a formal party to this case. We have experts that are presenting evidence, including myself, about the reasonableness of this and the effect that it's going to have on customers. And we fully expect that the Commission is going to approve a far smaller hike than what Xcel has asked for.
NINA MOINI: OK. That's interesting. So Xcel said in a statement to us, to MPR News that its rate increases since 2013 have been lower than inflation. Said they're working to make it easier to qualify for the energy assistance programs. Do you think that that is enough of a cushion to offset this impact here?
ANNIE LEVENSON-FALK: Well, first of all, I really appreciate Xcel's work to make their affordability programs more accessible, and we work with them on that. And I think that's really important but also not sufficient. We also have to make sure that the rates are affordable to Minnesota households.
NINA MOINI: Do you think that issues you mentioned of infrastructure and updates and reliability, are those some of the more urgent reasons? I guess, if you could rank the urgency of what the needs are, is there a way to rank that, or are they all important in different ways?
ANNIE LEVENSON-FALK: There's a long list of very important and very detailed things that are in this rate hike request. And certainly, we have to keep the infrastructure functioning and reliable and up to date. And reducing emissions is also really important. But like I said, one aspect that we're particularly focused on is the utilitie's return. And there's a big opportunity for savings there, I think. Xcel is requesting an increase of approximately $144 million a year in the return, and we're actually recommending it go down by about $30 million a year.
NINA MOINI: Yeah, and so explain the return on investment again. What does that look like from their perspective?
ANNIE LEVENSON-FALK: Yeah, so investor-owned utilities like Xcel, they're owned by shareholders. And they're granted a monopoly service territory in exchange for providing reliable service. And part of that deal is that they get to earn a fair return for their shareholders. And that can work in everybody's interest because then they keep investing and keep the system reliable and modern. But the Public Utilities Commission is tasked with making sure that that return is reasonable and that it's balanced with the interest of the public in having affordable rates. And so that's what their job is here.
NINA MOINI: OK. So one of the things, too, that was interesting is the company asking for this 9.6% increase for 2025. And well, we're deep into 2025, obviously. So is that reflected in people's electric bills, or how does that work?
ANNIE LEVENSON-FALK: Yeah, these proceedings take a really long time.
NINA MOINI: Sounds like it.
ANNIE LEVENSON-FALK: In recognition of that, Minnesota law lets the utilities earn what they call an interim rate increase. So if you're an Xcel electric customer, you already have a line item on your bill that's the interim rate hike, and that's 5.2%. That's been on people's bills as the final rate hike is being litigated. And once the final decision is made, if it's less than that 5.2% customers will get a refund with interest. If it's more than that 5.2% you don't have to make up the past balance on that.
NINA MOINI: OK. So earlier, I said that Xcel had said that their rate increases were not greater than inflation or were-- I guess they're saying these have been fair. Do these types of rate hikes happen very often? Is it a really big deal to get one? It sounds like it's a big deal to make one of them happen. But how common is this?
ANNIE LEVENSON-FALK: Yeah, it's a big deal in that there's a lot of work that goes into evaluating it. And it can really vary, but recently it's been happening very frequently. So Xcel just is coming off three years of back-to-back rate increases. And now they have another one where they're asking for two more consecutive years of rate increases. So it's been a lot for customers.
NINA MOINI: What do you wish people understood? I think for most people the bill comes in the mail. You're like, oh, oh, no. But I feel like people don't have a great understanding of how it all works behind the scenes and some of the procedural work that you're doing. What do you want people to about how they're getting their electricity?
ANNIE LEVENSON-FALK: Yeah, there's so much. But I think, specifically on this, if you're concerned about a rate increase, make your voice heard. If you just Google Xcel rate case, you will get routed to the Minnesota Public Utilities Commission. They have a really nice explainer page about the Xcel request and the ways that people can weigh in, either in writing or in one of the in-person or online virtual hearings that are happening this week and next week. So I would really encourage folks to submit a comment or to come to a public hearing and voice their concerns.
NINA MOINI: And what are some of the alternatives that would be out there for Xcel if they weren't to rely on a rate increase?
ANNIE LEVENSON-FALK: Well, I have no doubt that the PC is going to settle this at a place that's reasonable for Xcel, where they can continue to provide reliable and clean power and be a healthy business without earning an outsized return.
NINA MOINI: All right. Thank you so much for your time this afternoon, Annie. Really interesting stuff and very important. So thank you for your work.
ANNIE LEVENSON-FALK: Thank you.
NINA MOINI: Annie Levenson-Falk is the executive director of the Citizens Utility Board. That's a consumer advocacy group. Again, there's a virtual public hearing on electric rates tonight at 6:30. Others are scheduled around the state through next Thursday. And want to say that in a statement to MPR News, Xcel also said, "We are committed to meeting our state's growing demand for electricity, maintaining reliable service, working toward a cleaner energy future, and keeping costs low for our customers. Our proposal reflects the needs expressed by our customers as they electrify their homes and businesses and invest in economic development."
The Public Utilities Commission, which is the board that regulates utilities in Minnesota, is holding meetings around the state this month to gather input. My next guest advocates for utility consumers as the leader of a group called Citizens Utility Board, or CUB. Annie Levenson-Falk joins me in the studio. Thanks for being here, Annie.
ANNIE LEVENSON-FALK: Yeah, thanks for having me on.
NINA MOINI: This is another thing that really impacts so many people across our state. So I really appreciate you being here to talk about this. And I didn't even realize, or people may not realize, that utilities like Xcel need approval from the state to raise their rates. Can you talk a little bit about how that process works?
ANNIE LEVENSON-FALK: Yeah, that's right, because utilities in Minnesota are monopolies and you don't have a choice in your electric provider, most of them, the largest ones have to get approval from a state board called the Public Utilities Commission. So that's all of the investor-owned, the for-profit utilities, have to go to the PUC. So they file their request for a rate increase, which Xcel has done, and the PUC will organize a process to gather public input and expert analysis on that request and then make a final decision.
NINA MOINI: All right. Yeah, no, that's good context. So what's your understanding, Annie, of why Xcel is proposing this rate hike? What are some of their main reasons?
ANNIE LEVENSON-FALK: Yeah, you just listed some of them, modernizing the grid, replacing old infrastructure. The power plants are pretty old, and they need to be maintained or, in some cases, replaced. And they're being replaced with clean energy, which in a lot of cases is the most cost effective. But that's not to say there's not a cost to that. There still is. So there's investment that's needed in the system. There's general increased costs of business that everyone is familiar with. But another major portion of this is a request for hirer return for their investors. So that constitutes actually about 1/3 of their request is just a request for a higher return on equity for the utility.
NINA MOINI: And another thing that I was hearing about that I thought was sad, maybe it's a sign of the times, but that there's been a surge in shutoffs due to failed payments just because people are really struggling. What are you hearing about that?
ANNIE LEVENSON-FALK: Yeah, as a ratepayer advocate, we spend a lot of time trying to understand the state of affordability for Minnesota households. And there are some real red flags. Xcel, in particular, has really increased shutoffs. They've been skyrocketing over the past couple of years. There was more than 50,000 Xcel households were shut off last year, and they're on pace to match or exceed that in 2025.
NINA MOINI: What have you been doing to advocate around this? Amidst all of that, this idea of a rate hike, how do you balance all that?
ANNIE LEVENSON-FALK: Yeah, and that's something that the PUC is going to have to take into consideration when they look at the rate hike. They're going to look at, first of all, has Xcel presented evidence that they need the money? But also, what's the effect going to be on Minnesotans? And there's been an enormous showing of public concern about this. There have been almost $7,000 public comments filed, which I've never seen before. And the vast majority of those expressed concern with the rate hike.
So the Citizens Utility Board is a formal party to this case. We have experts that are presenting evidence, including myself, about the reasonableness of this and the effect that it's going to have on customers. And we fully expect that the Commission is going to approve a far smaller hike than what Xcel has asked for.
NINA MOINI: OK. That's interesting. So Xcel said in a statement to us, to MPR News that its rate increases since 2013 have been lower than inflation. Said they're working to make it easier to qualify for the energy assistance programs. Do you think that that is enough of a cushion to offset this impact here?
ANNIE LEVENSON-FALK: Well, first of all, I really appreciate Xcel's work to make their affordability programs more accessible, and we work with them on that. And I think that's really important but also not sufficient. We also have to make sure that the rates are affordable to Minnesota households.
NINA MOINI: Do you think that issues you mentioned of infrastructure and updates and reliability, are those some of the more urgent reasons? I guess, if you could rank the urgency of what the needs are, is there a way to rank that, or are they all important in different ways?
ANNIE LEVENSON-FALK: There's a long list of very important and very detailed things that are in this rate hike request. And certainly, we have to keep the infrastructure functioning and reliable and up to date. And reducing emissions is also really important. But like I said, one aspect that we're particularly focused on is the utilitie's return. And there's a big opportunity for savings there, I think. Xcel is requesting an increase of approximately $144 million a year in the return, and we're actually recommending it go down by about $30 million a year.
NINA MOINI: Yeah, and so explain the return on investment again. What does that look like from their perspective?
ANNIE LEVENSON-FALK: Yeah, so investor-owned utilities like Xcel, they're owned by shareholders. And they're granted a monopoly service territory in exchange for providing reliable service. And part of that deal is that they get to earn a fair return for their shareholders. And that can work in everybody's interest because then they keep investing and keep the system reliable and modern. But the Public Utilities Commission is tasked with making sure that that return is reasonable and that it's balanced with the interest of the public in having affordable rates. And so that's what their job is here.
NINA MOINI: OK. So one of the things, too, that was interesting is the company asking for this 9.6% increase for 2025. And well, we're deep into 2025, obviously. So is that reflected in people's electric bills, or how does that work?
ANNIE LEVENSON-FALK: Yeah, these proceedings take a really long time.
NINA MOINI: Sounds like it.
ANNIE LEVENSON-FALK: In recognition of that, Minnesota law lets the utilities earn what they call an interim rate increase. So if you're an Xcel electric customer, you already have a line item on your bill that's the interim rate hike, and that's 5.2%. That's been on people's bills as the final rate hike is being litigated. And once the final decision is made, if it's less than that 5.2% customers will get a refund with interest. If it's more than that 5.2% you don't have to make up the past balance on that.
NINA MOINI: OK. So earlier, I said that Xcel had said that their rate increases were not greater than inflation or were-- I guess they're saying these have been fair. Do these types of rate hikes happen very often? Is it a really big deal to get one? It sounds like it's a big deal to make one of them happen. But how common is this?
ANNIE LEVENSON-FALK: Yeah, it's a big deal in that there's a lot of work that goes into evaluating it. And it can really vary, but recently it's been happening very frequently. So Xcel just is coming off three years of back-to-back rate increases. And now they have another one where they're asking for two more consecutive years of rate increases. So it's been a lot for customers.
NINA MOINI: What do you wish people understood? I think for most people the bill comes in the mail. You're like, oh, oh, no. But I feel like people don't have a great understanding of how it all works behind the scenes and some of the procedural work that you're doing. What do you want people to about how they're getting their electricity?
ANNIE LEVENSON-FALK: Yeah, there's so much. But I think, specifically on this, if you're concerned about a rate increase, make your voice heard. If you just Google Xcel rate case, you will get routed to the Minnesota Public Utilities Commission. They have a really nice explainer page about the Xcel request and the ways that people can weigh in, either in writing or in one of the in-person or online virtual hearings that are happening this week and next week. So I would really encourage folks to submit a comment or to come to a public hearing and voice their concerns.
NINA MOINI: And what are some of the alternatives that would be out there for Xcel if they weren't to rely on a rate increase?
ANNIE LEVENSON-FALK: Well, I have no doubt that the PC is going to settle this at a place that's reasonable for Xcel, where they can continue to provide reliable and clean power and be a healthy business without earning an outsized return.
NINA MOINI: All right. Thank you so much for your time this afternoon, Annie. Really interesting stuff and very important. So thank you for your work.
ANNIE LEVENSON-FALK: Thank you.
NINA MOINI: Annie Levenson-Falk is the executive director of the Citizens Utility Board. That's a consumer advocacy group. Again, there's a virtual public hearing on electric rates tonight at 6:30. Others are scheduled around the state through next Thursday. And want to say that in a statement to MPR News, Xcel also said, "We are committed to meeting our state's growing demand for electricity, maintaining reliable service, working toward a cleaner energy future, and keeping costs low for our customers. Our proposal reflects the needs expressed by our customers as they electrify their homes and businesses and invest in economic development."
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