The Minnesota Department of Commerce has questioned the transparency of revenue data Xcel Energy submitted to support a 10.7 percent electric rate hike — a charge that it takes seriously, the company said Monday.
The state agency called Xcel’s data “opaque” in written testimony questioning the company’s request for a $285 million rate hike. The department, which analyzes utility charges on behalf of ratepayers, has urged regulators to slash the request by two-thirds.
“If Xcel fails ... to make its revenue calculations transparent and subject to independent replication, it should bear the real risk of rejection” of its next rate hike request, Adam Heinen, a department rate analyst, said in the testimony.
An Xcel official said the company didn’t intend to be unclear. “We want to get accurate forecasts,” Laura McCarten, regional vice president for Xcel, said in an interview.
Xcel is seeking a rate hike from its 1.2 million electric customers in Minnesota, mainly to recover its investments in power plants and the electrical grid.
As a secondary factor in the proposed rate hike, the company projected lower electrical demand, including the loss of two big industrial customers — a Sartell, Minn., paper mill that exploded and burned and the now-closed Ford Motor Co. assembly plant in St. Paul.
But state officials have disputed Xcel’s sales figures and have projected that the company will sell 1.4 percent more power in Minnesota this year than the utility estimated, partly because of an uptick in home construction.
The state Public Utilities Commission’s decision on a permanent rate hike is expected in the fall after an administrative judge reviews the financial details.
Sales and revenue forecasts are critical parts of setting utility rates. If the sales forecast is too low, customers end up paying too much. Utilities use complex statistical methods to account for variables like year-over-year weather differences.
McCarten did not respond in detail to the state officials’ concerns about transparency. “To the extent that we need to augment the information, we definitely take that seriously,” she said.
She added that Xcel will reply in writing to the Commerce Department, which has recommended stripping away $191 million, or 67 percent, of the rate increase requested by the utility.
The department said Xcel should get a lower return on equity and recover less money on power plants and for pension and incentive expenses. The state’s higher power sales and revenue forecast would shave $24 million from the requested increase, according to Xcel’s analysis.
Xcel electric customers are paying 9 percent more under an interim rate hike that took effect in January.
If regulators accept the scaled-back rate hike recommendation of the Commerce Department, it still would boost bills by 3 percent to 4 percent. Under state law, customers will get a refund if the interim rate turns out to be too high.
McCarten said that as time goes on more will be known about the utility’s actual 2013 revenue, reducing the need to depend on estimates. She said the regulatory process tends to “narrow the issues” and can lead to an agreement among intervening parties like the Commerce Department, as happened in Xcel’s last rate case.
“We want to be an open company,” she said.