Commerce Dept. calls Xcel's proposed rate increase 'way too high'

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The Minnesota Department of Commerce says Xcel Energy's proposed rate increase is too large and should be scaled back by 60 percent.

The Pioneer Press says the increase Xcel is seeking over a two-year period amounts to a rate hike of 10.4 percent.

Commerce Commissioner Mike Rothman says “Xcel’s requested rate increase is way too high. The utility’s math does not add up."

Xcel Energy provides electricity to 1.2 million customers in central and southern Minnesota, including the Twin Cities. The utility maintains the rate increase is needed to cover the cost of improvements to its system of generating and transmitting power.

But the Commerce Department's statement says an investigation found Xcel overstated the costs of its expenditures and understated its revenue from sales and insurance benefits.

The Commerce Department sent its recommendation for a smaller rate increase to the Public Utilities Commission, which will have the final say. Later this month (June 23-27) public hearings on the proposal will be held at several Twin Cities locations and in St. Cloud and Mankato.

Proposed changes in how customers are charged

Separately on Thursday a coalition of environmental groups urged Xcel to change the way it charges its Minnesota customers for electricity.

MPR News reports five groups joined together in the call for a system that would raise the price of a kilowatt hour of electricity when the amount of power a customer uses crosses certain thresholds.

An official with the group Fresh Energy tells MPR when Xcel introduced a system of pricing tiers in Colorado it led to a reduction in energy use. Minnesota Power, which serves customers in central and northern counties, already uses tiered pricing.

The Star Tribune says the groups are proposing four tiers with rates starting at 6.7 cents per kilowatt hour and rising to 14 cents for heavy users. A spokeswoman for Xcel Energy tells the newspaper the utility will consider the proposal and is not ready to comment on it.

Tiered electric rates are used in California. A utility watchdog group in that state offers an explanation of how they work.

Minnesota's Commerce Department also recommended that regulators approve "decoupling." That's an approach to utility prices that separates earnings from the amount of energy consumed. Advocates say it makes utility companies more likely to encourage energy conservation.

There's more background on decoupling here.

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