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State regulators limited Xcel Energy’s proposed electricity rate increase after energy justice advocates lobbied for affordability.
The Minnesota Public Utilities Commission granted Xcel Energy a 9.6 percent rate increase over three years in a ruling issued June 1. The approved increase is less than half Xcel’s initial 21 percent increase request.
The Public Utilities Commission, a governor-appointed board that regulates the state’s energy providers, reviews proposed rate cases. Xcel Energy is the state’s largest utility, providing electricity to 1.3 million households in Minnesota, including most of the Twin Cities metro, many pockets of western Minnesota, and other cities around the state. The rate increase allows Xcel to collect an additional $306 million from customers over the next three years.
This rate case saw a new voice lobbying for low-income households and ratepayers of color, a group of energy justice nonprofits and cooperatives known as the Just Solar Coalition. The Just Solar Coalition includes Minnesota Interfaith Power and Light, Community Power, Cooperative Energy Futures, and Vote Solar. The group held formal status as an intervenor and had everyday ratepayers, academic experts, and lawyers testify on their behalf in the case.
“These voices aren’t historically in these proceedings,” said Erica McConnell, an attorney with the Environmental Law and Policy Center who represented the Just Solar Coalition.
Their involvement resulted in regulators adopting for the first time a provision acknowledging that the concept of energy justice is relevant to setting electricity rates. Energy justice is the notion that residents of color and low-income households are more likely to live in inefficient housing leading to higher energy bills, and that those same communities are more exposed to pollution from energy production.
“I think that’s really positive for what that means in the future for rate cases,” said Gabe Chan, a professor at the University of Minnesota who was an expert witness for the Just Solar Coalition in the case.
Setting the rate
Rate cases before the Public Utilities Commission (PUC) play out via a public docket where a utility such as Xcel and energy experts go back and forth over arguments about how much money the utility needs to build new infrastructure, pay its employees, and provide essential services. Cases are typically heard every three years.
Xcel’s initial proposal called for a 21 percent rate increase, and was lowered to a 15 percent ask through docket negotiations. Prior to oral arguments held before the commission in May, an administrative law judge issued a nonbinding recommendation that Xcel should be allowed a 12 percent rate increase, the Star Tribune reported.
The company intends to appeal the PUC’s ruling, and said in a statement that the 9.6 percent rate increase means it will reconsider clean energy investments in Minnesota, including a large electric vehicle charging program.
“The commission’s decision on our recent electric rate case will limit our ability to continue to lead the clean energy transition and may make reaching Minnesota’s aggressive goal of 100% carbon-free electricity by 2040 more costly for our customers and company,” Xcel said in a statement.
A key factor weighed by the commission is Xcel’s return on equity, the amount the company is authorized to receive as a return on investments into infrastructure. The authorized returns are largely seen as guaranteed. Utility companies earn much of their profits from building energy infrastructure. Today, Xcel has a 9.06 percent authorized return on equity, and sought an increase to 10.2 percent.
Regulators approved a slight increase to 9.25 percent return on equity. Although the Just Solar Coalition had joined the nonprofit Citizens Utility Board in requesting a rate of less than 9 percent, McConnell said she was happy with the commission’s decision.
The proposed rate increase comes after a year of record profits for Xcel Energy. Last year, the company earned $1.6 billion in profits. The company’s CEO, Bob Frenzel, made over $10.3 million last year, the Minneapolis-St. Paul Business Journal reported.
The commission ruled Xcel could not go forward with a plan to use ratepayer funds to finance an executive level compensation package of $24.6 million, and placed a 15 percent cap on annual incentive-based compensation.
“This commission is laser focused on affordability and reliability. We scrutinize every dollar to ensure Minnesotans only pay what is necessary,” Commission Chair Katie Sieben said in a statement.
Boosts for affordability
The commission did include two significant provisions for affordability in its ruling. First, it adopted a program proposed by the Energy Cents Coalition to create a program for low-income, low-usage customers. Secondly, it reduced the fixed customer charge from $8 to $6.
The low-income, low-usage program will allow for households qualifying for energy assistance to pay more affordable rates. There are an estimated 92,000 Xcel customers who would qualify for the program, which would offer a 35 percent discount to enrollees. The low-usage cutoff would be at 300 kilowatt hours per month, a fairly typical consumption amount for a household.
Enrolling in the program will be streamlined, which proponents say will enable more people to benefit. Today, just 20 percent of eligible households in the state are enrolled in federal energy assistance programs.
The Just Solar Coalition asked the commission to also include higher usage low-income households in the program, arguing that households with big families living in inefficient households that use lots of electricity shouldn’t be excluded.
“Hopefully that’s something the commission continues to expand and look at,” McConnell said.
The fixed customer charge is something every household enrolled with Xcel pays, regardless of energy used. If someone is out of town with everything off and unplugged for a month, they will still be charged the fee. Lowering it enables energy conscious consumers to lower their bills even further, McConnell said.
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A seat at the table
The Just Solar Coalition was founded in 2014, and beyond the groups involved directly in the rate case also includes organizations such as Minneapolis Climate Action, Honor the Earth, the Rural Renewable Energy Alliance, and the Sierra Club. The group has been involved in pushing for several energy justice measures statewide.
Docket arguments before the PUC are typically technical and laden with jargon, but Alice Madden, an energy democracy specialist with Community Power, helped the coalition garner participation from everyday ratepayers of diverse backgrounds. They collected testimony from consumers struggling to pay their monthly bills, and tried to make the case that it is the responsibility of regulators to consider the interests of those customers when setting rates.
The Just Solar Coalition highlighted issues related to equity, such as disconnections and higher energy burdens. Chan, an energy researcher, submitted testimony with data showing that census block groups where most residents are people of color have more than double the service disconnections than areas that are largely white.
He also found data showing that Minneapolis’ Green Zones, areas with concentrated poverty and large communities of color, experience the longest power outages in Xcel’s service area during storms or other events.
“What we were arguing is the rate case is where these issues all come together,” Chan said.
The commission opted to punt some of those issues to different dockets on Xcel’s energy distribution plans and a state working group on energy equity. That move will make it harder for everyday people to have their voices heard, Just Solar Coalition members argue.
“We shouldn’t have to come back to every docket with experts and lawyers,” Madden said.
