Regulators reduce Xcel’s 18% electric rate hike to 6%

A state regulatory agency is limiting a utility company’s electric rate increase to about 6% after the company requested a nearly 18% rate hike. The change affects 97,500 South Dakota customers.

The 18% rate hike has been temporarily in effect for the last six months after an initial deadline passed for the regulatory agency, the Public Utilities Commission, to act on the request. The commission had six months to investigate and make a decision about the rate request before the company implemented it, but the three-member commission did not declare a decision in that timeframe. The commission rarely completes its investigations in six months.

After six more months of review, the agency made its new determination Tuesday during a public hearing in Pierre. Customers will now receive refunds for the past six months of extra payments, with the average customer receiving $90.30.

The company, Xcel Energy, filed a notice of intent to implement the rate hike on Nov. 15, 2022, and increased its electricity rates by 17.9 percent starting Jan. 1, 2023. 

Xcel stood to gain about $44 million in annual revenue from the originally proposed rate increase – about $30 million more than what it will receive from the lesser increase.

The new increase of 5.85% will raise the average customer’s bill $4.67 per month.

The commission’s settlement also prevents Xcel from further rate increases until 2026.

The PUC’s process

Xcel applied for the rate increase on Jun. 30, 2022. The three-member, elected commission then moved to suspend the rate increase for six months – providing time for its staff to investigate and for the commission to make a decision before the rate increase could go into effect. The commission staff consists of six analysts and two staff attorneys.

The staff sent Xcel 13 sets of requests. Each set of requests had a number of individual questions, which added up to a total of 343 questions.

In addition to written questions, the staff also had conversations, phone calls and meetings with Xcel’s employees to ask for more information and clarification.

“And that is why it takes so long,” Commissioner Chris Nelson said.

When the commission and its staff failed to complete the investigation or make a decision on the rate increase by the end of 2022, the rate increase went into effect while the commission and staff continued their work – resulting in customers temporarily paying 18% higher rates, only to have the increase now scaled back to 6%.

Nelson said that the procedure may need a review.

“I have to start to ask myself, does that interim rate law need to be tweaked?” Nelson said. “I think that’s something we should have a discussion on.”

The commission and staff review of the rate increase included gathering information on factors such as company operating expenses, employee benefits, executive compensation, corporate advertising, and the cost of generation and transmission facilities.

Xcel last filed a rate increase in 2014. Since then, the company says it has made significant investments in infrastructure, including new wind and natural gas generation facilities, large transmission projects, and decommissioning one of its nuclear reactors. The company also cited increased labor and operating costs. 

Black Hills Energy made the most recent South Dakota electricity rate hike of comparable size in 2010. The company had requested a 19.4% rate increase. 

The PUC investigation into that request also went past the initial six-month window, and the rate increase took effect in the interim. But upon completion of the commission’s investigation, which took the entire 12 months the law allows, the commission approved a 12.7% increase, resulting in customer refunds.