Minnesota utility regulators approve 8.17% rate hike for Xcel gas customers

Minnesota utility regulators on Thursday approved an 8.17% rate increase for Xcel Energy’s natural gas customers — the equivalent of $4.20 per month for an average household.

The 8.17% rate is an average for all of Xcel’s customers. Commercial customers will get bigger increases than residential ones.

Xcel had initially asked for a higher 9.6% rate hike, but it struck a deal with state officials, unions and affordability advocates on the lower amount. The state Public Utilities Commission voted 4-0 in favor of that agreement, which is worth $50.13 million to Xcel.

Xcel is the second-largest gas provider in Minnesota with about 490,000 customers, behind only CenterPoint Energy. Xcel said its gas rates for Minnesota residential customers would remain below the national average.

About 425 people submitted written comments on the rate increase, nearly all in opposition, according to PUC staff. One was Rita Gregory-Huseth of St. Cloud, who wrote to the PUC in July after the settlement was announced.

“I’m on a fixed income and it’s hard enough to get by from month to month,” the letter said.

Xcel said it wanted higher rates to upgrade and maintain its gas transmission system and distribution infrastructure, as well as safety systems at gas peaking plants and other projects. The company also said its costs rose with historic inflation, higher interest rates and global supply-chain disruptions.

“This outcome supports improvements in system reliability and resiliency, strengthening safety and inspection programs, and taking steps to operate the cleanest possible natural gas system that includes more than 9,700 miles of underground infrastructure in Minnesota,” Xcel spokesman Theo Keith said.

Commissioner Hwikwon Ham voted for the settlement, but said he felt the process wasn’t transparent enough and pushed consumer advocates to explain why they agreed to let Xcel take in more money than affordability watchdogs wanted, among other concessions.

Joseph Cherney, a lawyer in Attorney General Keith Ellison’s office, said they are always concerned about rising bills, but said the deal includes lower rates for residential customers and small businesses than what Xcel originally proposed. It also prevents the risk of a worse outcome if the case went forward without a settlement, he said.

“These are basic necessities and they have to be affordable,” Cherney said. “We view this as a just and reasonable settlement.”

Though the 8.17% rate increase officially takes effect July 1, customers have already been paying 8.5% more temporarily while the hike was being debated. Customers will get a small refund on their 2024 bills as a result. Earlier this year, Xcel estimated that refund would be a $9 one-time bill credit, but the final amount hasn’t been calculated yet.

Xcel expects the refund will come later this year.

The settlement was struck with every party that officially intervened in the case, including the Minnesota Department of Commerce, Ellison‘s office, two construction unions and the consumer advocate nonprofit Citizens Utility Board of Minnesota.

That board and Ellison’s office convinced Xcel to not bill customers for about $300,000 in dues to the American Gas Association, a trade group representing the industry. The board argued the gas association promotes continued use of fossil fuels over carbon-free energy.

The settlement also says Xcel can only take $150,000 from customers for the salary of each of the company’s 10 highest-paid executives.

The PUC in March 2023 approved a 2.7%, $20.9 million gas rate increase for Xcel. That was significantly smaller than the 6.6% hike Xcel initially asked for in 2021. Before that, Xcel requested much smaller rate increases for natural gas service in 2009, 2006 and 2004.

Xcel is also asking for higher electric rates in Minnesota. That request is still pending before the PUC, which in December approved a temporary 5.2% hike for 2025 that will add up to an extra $5.39 per month for a typical household.