Xcel Energy customers in Wisconsin will pay more for gas and electricity next year.
Wisconsin regulators on Thursday authorized Xcel to increase its electricity revenue by 1.35 percent and about 8.3 percent for natural gas.
That is expected to translate to about $2 a month more for the average residential electricity bill and an additional $4.76 a month for gas.
Xcel had asked the PSC to approve a $24.7 million increase in electricity revenues and an additional $12 million for natural gas, which it estimated would translate to about $6 more per month on the average residential electric bill and $5.31 more for gas.
The three-member commission approved a variety of changes that add up to additional revenues of $9.4 million for electricity and $9.9 million for natural gas.
Residential customers will pay an additional $3 per month simply to maintain service after the commission accepted Xcel’s proposal to raise the fixed charge to $17, which is more than twice what it was in 2015.
The Citizens Utility Board, a nonprofit organization representing the interests of residential and business ratepayers, argued the flat fees disproportionately impact low-income residents and discourage energy conservation.
PSC Chairwoman Ellen Novak said she didn’t agree with that argument “based on the history of how we’ve collected costs.”
“There’s still costs to be connected to the electrical system 24/7,” she said.
Huebsch said he’s sensitive to the impact on older ratepayers but said he doesn’t think $17 a month “is going to be too significant a problem for them.” Commissioner Lon Roberts said if the fixed charges present a burden to some customers that should be addressed through “a different mechanism.”
CUB Executive Director Tom Content said he was disappointed in the decision, especially considering that Minnesota regulators this year rejected a similar increase for Xcel customers there, who pay just $8 a month.
“They had such a big increase a couple of years ago we didn’t think it was necessary to increase it more,” he said. “It really hurts the folks who use the least energy.”
Xcel said the electric rate increase is necessary to support its infrastructure investments as well as lower than expected demand, citing recent dips in the commercial and industrial customers — especially in the industrial sand and oil sectors — and more efficient appliances and lighting as well as slowing population growth that have slowed residential sector growth.
The primary cost drivers behind the electric rate request are a new natural gas peaking plant in the Twin Cities and upgrades to its Prairie Island nuclear plant and two aging hydroelectric plants. The natural gas increase is driven by investments in the distribution system as well as ongoing cleanup costs of the company’s former gas plant in Ashland, Wis.
Since 2006, Xcel has sought to increase electricity revenues by an average of 6.4 percent each year. The PSC granted all but one, allowing an average hike of about 3.5 percent. In the same time frame, the company sought to increase natural gas revenue seven times by an average of 4.5 percent. The PSC approved six, granting the company on average about 60 percent of what it asked for.
The average Xcel residential electric bill in 2017 was just over $100, according to data from the PSC. That’s lower than all but one of the state’s largest investor-owned utilities.
Commissioners agreed to allow Xcel a 9.8 percent return on equity, in line with its ruling earlier this year for Madison Gas & Electric, which marked the first time in more than 40 years that any of the state’s investor-owned utilities were held below a 10 percent profit margin.
Commissioner Mike Huebsch argued that 9.65 percent would be a reasonable rate recognizing changes in the economy without alarming shareholders, but the former state representative from West Salem agreed to join the other two commissioners who supported the 9.8 percent return.
Xcel had requested to maintain its current 10 percent profit margin while the CUB argued that 9 percent would be more in line with national trends and interest rates. Minnesota regulators capped Xcel’s rate at 9.2 percent.
The CUB estimated a 9 percent return would have saved Xcel's 257,000 ratepayers about $10 million.
“We think this is a missed opportunity to make a dent,” Content said. “This was the real time to actually grab some savings for customers.”