Xcel halves its rate increase request in North Dakota

Xcel Energy has decreased its proposed electricity rate increase for North Dakota customers by half. It’s looking like a bid-down situation: Xcel Energy proposes a ridiculous increase, then cuts back toward a rate increase that is merely exorbitant.  

The North Dakota Monitor reported on the rate case:

The agreement that is pending approval with the North Dakota Public Service Commission would raise overall rates by 10.37%, with the increase for residential customers at 12.92%. 

Northern States Power Co., part of Minnesota-based Xcel Energy, had originally asked for a rate increase of 19.34% with the residential rate increasing by more than 24%.

The full rate increase would have cost the average Xcel Energy residential customer in North Dakota an extra $22.34 per month over last year. The cutback brings Xcel’s North Dakota rate increase request closer to what the company is requesting in Minnesota (a 13.2 percent increase in two years).

One of the themes touched upon by commenters, notes the Monitor, is the “effect of Minnesota policies.” Xcel Energy has cut back its coal-fired power plant usage in compliance with Minnesota’s mandate for 100 percent zero-carbon electricity by 2040, earlier than North Dakota regulators have anticipated. One of three coal units at Sherco near Monticello, Minnesota was retired on New Year’s Eve, 2023, and Xcel Energy plans to close the other two units in 2026 and 2030.

In Xcel Energy’s rate filing, the company justifies the increase as a result “of the Company’s capital investments, including in the electric generation, transmission, and distribution systems, increased operation and maintenance expenses, and increased depreciation.” Vice President of state regulatory policy at Xcel Energy, Allen Krug, told Public Service Commissioner Sheri Haugen-Hoffart that the rate increases are not driven by policy differences and that Xcel continues to use natural gas.

Xcel’s closure of coal-fired power plants will mean higher electricity prices, in part because new wind and new solar construction cost twice and three times the cost of continuing to operate Sherco. To maintain reliability, Xcel will need to build a lot of wind and solar and maintain enough dispatchable power to compensate. There will also need to be more transmission and distribution, to connect these far-flung generation sources to the grid. These costs will almost certainly spill over into North Dakota because the company operates in multiple states and is within the same regional transmission organization, MISO.

North Dakota customers haven’t voted for Minnesota’s energy policies, but they may end up paying for them anyway. Xcel can deny that Minnesota’s policy choices are driving their business choices, but retiring cheap, reliable coal and replacing generation with expensive wind, solar, transmission, and standby natural gas has serious costs across state lines. Minnesota’s policy decisions are reshaping Xcel’s generation fleet, and putting a 50-percent off tag on the rate increase serves only to soften the blow for consumers.