Commerce Department: Reject 60% of Xcel's electric rate hike

Xcel Energy is facing powerful pushback on its latest effort to raise electric rates in Minnesota.

The state Commerce Department, which analyzes utility rates on behalf of consumers, wants regulators to throw out more than half of Xcel's requested rate hike of $291 million — or 10.4 percent — over two years.

"Our investigation to date has concluded that over $174 million or 60 percent of the … rate increase should be rejected," Samir Ouanes, a department rate analyst, said Monday at a public meeting held by a regulatory judge working on the rate case.

Separately, the AARP, an advocacy group for older Americans, is mobilizing its 650,000 Minnesota members against the proposed Xcel increase and a related billing change. So far, AARP says, 600 people have submitted written comments, though only a fraction of that number showed up in person Monday for the first of seven public meetings on Xcel's request.

The Minnesota attorney general's office, which reviews utility rates on behalf of residential and small-business customers, also has questioned Xcel's requested rate hike. Ron Nelson, a utilities analyst for the office, said it will ask regulators for a "significant reduction" in the request.

Residential ratepayers face a 12.5 percent increase that would occur in two steps during 2014 and 2015. Since January, Xcel customers have been paying 4.6 percent more under an interim rate hike. That increase is subject to refund if the permanent rate hike is rejected or reduced by regulators.

"In our opinion, residential consumers are being asked to shoulder a share of the increase that is too large compared to the larger ratepayers," Jim Scheibel, a former St. Paul mayor who now serves as AARP state president, said at the Brooklyn Center hearing.

Xcel, the state's largest utility with 1.2 million electric customers in Minnesota, says it needs the rate increase to pay for upgrades in older power plants and the electric grid, and to cover increased costs and a projected 2014 revenue shortfall. If approved, the rate increase would be the sixth in eight years, and Xcel has said it likely will need additional increases as it completes its current investment cycle.

One of the dozen Xcel customers to speak at the afternoon hearing, Mike Grabow of Brooklyn Park, said the company is pricing electricity beyond the reach of many.

"There are a lot of people in this room and a lot of people in this state that are going to be forced right out of their homes because they aren't going to be able to afford electricity and gas," Grabow said.

Ouanes said the Commerce Department's review found that Xcel has overstated costs, including employee benefits and property taxes. In a written filing earlier this month, the department estimated that Xcel overstated its 2014 revenue shortfall by $55 million.

Xcel will "look for places where there are constructive solutions" to the concerns raised by the Commerce Department and others, including the AARP, Clark said.

Administrative Law Judge Jeanne Cochran, who presided at Monday's two public meetings, will hold five more this week, followed by a trial-like evidentiary hearing in August. She expects to issue a recommendation on rates in December. The state Public Utilities Commission will make the final decision, probably in 2015. About 40 Xcel customers, including many seniors, showed up at each of two meetings Monday in Brooklyn Center and Minneapolis.

AARP, with its vast membership base, is emerging as a well-organized voice for people over 50 affected by utility rate hikes. Older Americans are more vulnerable to increases in energy prices than younger people, and a bigger share of their spending goes to energy costs, AARP says.

In February, Will Phillips, a veteran of AARP grass-roots lobbying on utility matters, transferred from Atlanta to serve as Minnesota state director.

AARP is reaching out via its Web page, e-mail list, robocalls, social media, full-page newspaper ads and in-person contacts, including a booth at the Pride Festival this weekend in Loring Park. AARP also has hired experts to testify at the hearing in August.

AARP opposes two billing changes proposed by Xcel — an increase in the basic charge that customers pay regardless of energy use and a rate-adjustment plan called "decoupling."

In the same rate case, the EnergyCents Coalition, an advocacy group for low- and fixed-income utility customers, and five environmental groups have proposed a system of escalating, tiered rates for Xcel residential customers.