After nearly a year of negotiations and criticism from state agencies concerning Xcel Energy's spending -- including executive trips to lavish hotels in Europe and Colorado -- the state Public Utilities Commission (PUC) is to vote today on a rate increase that would raise most Minnesotans' average monthly electricity bills by 6 to 7 percent.
But customers already have been paying most of that, because of an interim rate increase early this year. Depending on the final number decided today, customers could see a small increase or possibly even a credit in their bills, reflecting the change from the interim boost.
Minneapolis-based Xcel Energy Inc., which serves 1.2 million electricity customers in Minnesota, is seeking an annual rate increase totaling $138 million starting this year. Its original request for a $156 million increase has been shaved over the past year, after the utility trimmed some costs and state consumer-protection agencies objected to some expenses coming out of ratepayers' pockets, including the pricey trips, golf outings and concerts.
The rate request is a long, complicated process that started nearly a year ago, when Xcel cited the need to maintain a safe and reliable electricity system in the face of escalating costs.
Material costs rising
In making its request, Xcel has acknowledged the "challenging economic times" facing its customers, but said that costs for materials -- such as transformers, wire, steel and cable -- have risen dramatically in the past few years, prompting the need to raise rates.
It also said it has invested more than $1.2 billion in its electrical system and is working on a long-term plan to reduce costs at its nuclear power plants.
The PUC, which is voting on the request today, in December approved an interim rate increase totaling $132 million.
The debate about the expenses often comes down to whether consumers or shareholders should foot the bill.
As part of the process to determine whether the rate bump was needed -- and if so, how much -- at least two consumer-protection agencies, the Office of Energy Security (OES) and the state attorney general's office, audited the request and investigated expenses.
The attorney general's office came down hard on Xcel. In one example, a report by the office found that customers paid about $41,000 of a $100,000-plus trip for a 2007 board retreat at a luxury resort in Beaver Creek, Colo. It also said that ratepayers picked up the tab for about $13,000 of another board retreat, this one to the St. Julien Hotel and Spa in Boulder, Colo., in 2008.
First class all the way
It also cited a trip in the fall of 2007 in which Xcel's chief financial officer traveled throughout Europe for investor-relations meetings. Minnesota ratepayers were on the hook for $3,683 of the $9,268 that the utility paid for airfare on what appeared to be first-class flights, according to the report. On that same trip, ratepayers paid $663 of a $1,669 bill for a one-night stay at the Mandarin Oriental Hotel in London.
Those are just a few of numerous trips and expenditures in the report that include meals at fancy hotels and meetings at golf courses.
"What we found was a lot of inappropriate spending on travel and entertainment expenses that we objected to," said Ben Wogsland, a spokesman for the attorney general's office. It's one thing, he said, for a company to make a business decision that these are appropriate. "It's another thing for a regulated utility to say consumers should be on the hook to pay for this."
The attorney general's office filed its report to the PUC, objecting to the expenses. In light of the report, Xcel agreed to remove nearly $3.9 million from its rate request that had been allocated toward employee and board directors expenses.
Xcel also agreed to cut $2.5 million in incentive compensation, and deferred wage increases by about $4.8 million, citing the country's economic conditions.
"We're a business like everybody else, and you take a look at the expenses and find a way to trim," Xcel spokesman Steve Roalstad said Monday.
Some cuts happened because of market conditions. Xcel cut the request by $6.6 million when it cut costs related to short-term capacity requirements.
An administrative law judge recently made recommendations about what should be cut or preserved. It will be up to the commission today to reach a final amount.
Kate O'Connell, a supervisor with the OES, said the judge ruled in favor of Xcel on about $1 million worth of costs that the OES would still like to see cut from the request, including about $325,000 for the company's charitable arm, the Xcel Foundation. "We objected to ratepayers paying for a foundation," she said.
Public comment taken during the process partly focused on the desire to defer any rate increase while people are suffering from job losses, questions about executive compensation and the desire to have Xcel cut costs, as consumers and businesses and consumers have been forced to do.
"Xcel needs to tighten its belt too, and not be pushing rate increases out there in a bad economy," said Jim Briant, who owns a 12-unit apartment building in Dodge Center for senior citizens and handicapped residents. He sent an e-mail to state officials this month as part of the public comment phase of the proceedings.
With no gas in the building for safety reasons, Briant said Monday that he has watched his electricity bill jump from $6,866 in 2001 to $10,127, which is what he is on track to spend this year. Because rents are controlled by the U.S. Department of Housing and Urban Development, he can't pass the increase on to tenants.
"And even if I could, they couldn't pay it, because they're on fixed incomes," he said.
Suzanne Ziegler • 612-673-1707