Xcel Energy’s $136 million windfall from last year’s federal tax act will be passed directly to its Minnesota customers through refunds, state utility regulators ruled Thursday.
Customers of Minnesota’s other investor-owned utilities will also receive refunds — or smaller rate increases — due to the 2017 tax law, which slashed the U.S. corporate income tax rate from 35 percent to 21 percent.
Xcel’s average residential electricity customer — someone who pays $85 to $90 per month — will get a refund of about $45 as a one-time bill credit. The company’s average residential gas customer — who pays around $48 a month — will get a one-time bill credit of about $8. Xcel said it expects the refunds will be made by year’s end.
Utilities are essentially monopolies, so their profits are regulated. Minnesota is one of many states where regulators are ordering utilities to fully or at least partly refund gains realized from the federal tax cut.
“It’s money ratepayers paid that they should not have had to pay,” said Dan Lipschultz, a member of the Minnesota Public Utilities Commission (PUC).
The PUC voted 5-0 to distribute all but $2 million of Xcel’s $136 million tax benefit directly to ratepayers. The $2 million carve-out will go to Power On, a program that helps low-income people pay their electricity bills.
The PUC rejected a proposal from Xcel to directly refund ratepayers about half of the $136 million but use the rest of the money to benefit ratepayers in indirect ways.
Of Xcel’s $136 million in Minnesota savings from the tax cut, just short of $130 million came from its electricity business, and the rest from gas. Minneapolis-based Xcel is by far Minnesota’s largest electric utility.
CenterPoint Energy, which is based in Houston, is the state’s largest gas utility. The PUC in May applied CenterPoint’s $21 million tax cut benefit to its current rate case. CenterPoint had asked for a $56.5 million rate hike, but the PUC granted an increase of only $3.9 million, partly to account for the $21 million in tax money.
Minnesota Energy Resources’ $5.2 million tax cut benefit will be applied to that company’s rate case currently before the PUC. The company supplies natural gas to parts of the southern metro area and several other parts of the state.
Duluth-based Minnesota Power’s $28.7 million upside from the tax cut will be applied to a rate case as well as to consumer refunds through bill credits.
Xcel had proposed a plan that would refund $68.1 million directly to electricity customers, while another $44.4 million in benefits would be deferred, as Xcel wouldn’t file for a rate increase in 2019. Xcel’s plan also called for $2 million for Power On and proposed that $21.7 million be applied to accelerated depreciation of the company’s Allen S. King power plant in Bayport.
“We are trying to deliver all of the tax benefits back to our customers by taking a creative approach,” Aakash Chandarana, Xcel’s vice president of regulatory affairs, told the PUC.
With the accelerated depreciation, Xcel said it could remove the coal-fired King plant from its books by 2028 rather than 2037. That could make it easier for Xcel to retire the plant earlier than planned, cutting carbon emissions. Clean-energy groups favored the accelerated depreciation plan, and two of five PUC members — Katie Sieben and Matt Schuerger — were also receptive to it.
But three other commissioners weren’t. “The King plant may close as an uneconomic plant regardless of accelerated depreciation,” said PUC Chairwoman Nancy Lange.