- Xcel/NSP Cases
Xcel Energy (aka Northern States Power-Wisconsin)
Rates for 2013
On June 1, 2012, Xcel Energy filed an application with the PSC to raise electric rates by $39.1 million, or 6.7 percent, starting January 1, 2013. The utility is also seeking to increase rates for delivering natural gas by $5.3 million, or 4.9 percent.
Xcel said the main drivers for the large increase in electric and gas rates are new transmission lines, major work on its two nuclear plants in Minnesota, restoration of a contaminated site in Ashland, other maintenance projects, and general inflation.
Xcel also needs to clean up a site in Ashland where manufactured gas was made between 1885 and 1947. The site, which is on the shore of Lake Superior, is on the U.S. Environmental Protection Agency’s “national priorities list,” which is part of the Superfund program to clean up contaminated areas. The site was also used for many other industrial and municipal purposes, and clean-up costs are estimated to be at least $100 million.
On August 9, 2012, Xcel announced a settlement with the U.S. Department of Justice and other agencies regarding the Ashland project, and will pay about $40 million to clean the land-portion of the site. CUB investigated Xcel’s proposal to charge ratepayers for this clean up. Costs to clean the lake-portion of the site will be investigated in future proceedings.
CUB also tried to reduce the size of the increase in electric and gas rates by questioning the costs charged to customers for fuel to make electricity, the allocation of utility costs between residential and industrial customers, and the design of residential rates.
On December 27, 2012, the PSC issued its final decision, allowing Xcel to increase electric rates by $36 million, or 6.1 percent. Natural gas delivery rates increased by $2.7 million, or 2.5 percent. The PSC agreed with CUB and reduced the rate increases by about $5 million: Xcel can’t charge ratepayers for incentive pay for management-level employees, and costs for cleaning up the Ashland Superfund site will be collected over more years. CUB also successfully kept electric customers from having to pay for cleaning up the Ashland site, though the burden now falls completely on gas customers.
Xcel Energy (aka Northern States Power-Wisconsin)
Rates for 2012
On June 1, 2011, Xcel Energy filed an application with the PSC to raise electric rates by $21.9 million or 3.8 percent. On June 15, Xcel increased its rate hike request to $29.2 million or 5.1 percent.
Xcel said that the proposed increase in electric rates is due to improvements made to various power plants, transmission lines, and the distribution system. Xcel also expects higher costs for fuel for making electricity in 2012. If rates are changed by the PSC, the new rates would take effect on January 1, 2012.
CUB intervened in the case and suggested ways to reduce the rate increase by having Xcel change “equivalent forced outage rates,” develop appropriate estimates of market prices for electricity, defer compliance costs with the U.S. Environmental Protection Agency’s Cross-State Air Pollution Rule, and the use of appropriate “production capacity allocators.” CUB also recommended ways to allocate costs between residential and industrial customers so that all pay their fair share; Xcel’s proposal would have industrial customers paying lower rates at the expense of higher rates for residential customers.
The PSC issued its final decision in the case on December 22, 2011. The PSC agreed with CUB regarding the appropriate estimates of market prices for electricity, reducing the rate increase by $1.0 million. The PSC also agreed with CUB and reduced Xcel’s return on equity (profit) to 10.4 percent from Xcel’s request of 10.75, resulting in a savings of $2.6 million.
Finally, the PSC agreed with CUB and Xcel that customers should receive $13 million from a settlement with the U.S. Department of Energy, regarding the federal government’s failure to take possession of nuclear waste from Xcel’s nuclear reactors in Minnesota. Xcel customers will receive the settlement proceeds through a one-time credit on an upcoming electric bill.
Upon Further Review... Project Cancelled $58 Million Saved
Xcel Energy (aka Northern States Power-Wisconsin)
Gasifier at Bayfront Power Plant
On February 23, 2009, Xcel filed an application to add a biomass gasifier to one of the units at the Bayfront facility near Ashland so that it could burn biogas instead of coal.
CUB intervened to make sure the cost of the project was reasonable. During the proceeding, CUB discovered a study written by a consultant hired by Xcel that concluded that the proposed project may not work at the size and scope envisioned. CUB also unearthed information indicating that Xcel had underestimated the cost for the project. CUB brought these concerns to light in legal briefs submitted to the PSC.
The PSC approved the project on December 22, 2009. Although the PSC determined that the project was technically feasible, the PSC agreed with CUB to limit the cost-overrun collar to 10 percent, rather than 20 percent sought by Xcel.
In addition, the PSC agreed with CUB and did not provide Xcel with a guarantee of cost recovery should the project cost more than the approved amount or should it not function properly. These actions protected ratepayers from paying millions of dollars for cost overruns for a project that may not work.
In May 2010, Xcel informed the PSC that the cost of the proposed project had increased from $58 million to $79.5 million. The utility canceled the project in November 2010 due to these higher than expected costs. CUB saved ratepayers more than $58 million on this too-expensive project.
Northern States Power-Wisconsin (dba Xcel Energy)
Rate Case for 2008 Rates
On June 1, 2007, Northern States Power (also know as Xcel Energy) applied to the PSC for permission to raise 2008 electric rates by $67 million, or 14.3 percent and increase 2008 natural gas rates by $5.3 million, or 3.3 percent.
According to Xcel, the utility asked for the rate increase because of higher prices for fossil fuels used to generate electricity, higher costs for transmitting electricity, and investments in its existing nuclear plants in Minnesota and new wind power plants.
CUB intervened in this case at the PSC, and urged Xcel to develop new rates for utility customers so that they can take steps to reduce their electric bills. CUB also asked the PSC to make sure costs are being fairly split between residential, commercial, and industrial customers.
Given the magnitude of the rate increase proposed by Xcel it is especially important to develop alternative rate options that allow residential customers to better control their electric energy costs while also reducing the cost drivers for the utility. CUB proposed residential rate designs ranging from inverted rates with a critical peak pricing element to prescriptive rate designs. CUB also investigated how residential customers should receive the value of the Company's proposed use of automated meter reading within a reasonable timeframe. Automated meter reading, if used for the benefits of customers, could allow ratepayers to receive accurate price signals regarding their electric energy consumption and change their usage accordingly to lower their utility bills.
CUB submitted testimony from its experts to the PSC in October 2007, and filed legal briefs.
On January 8, 2008, the PSC issued its written order and allowed Xcel to increase its 2008 electric rates by $39.4 million (8.1%) and natural gas rates by $5.3 million (3.3%). The PSC ordered Xcel to work with CUB on rate designs.
Northern States Power Company
NSPW 2006 Test Year Rate Case, Order Issued January 5, 2006
PSC Docket 4220-UR-114
On June 1st, 2005 NSP-Wisconsin filed an electric and natural gas rate case for the 2006 test year. The Company requested an increase of $41 million, or 10.3% on average, in electric rates, and $7 million, or 4.4% on average, in natural gas rates. Commission staff’s audit revised the company’s request to an estimated $45.4 million, or 11.4% on average increase in electric rates, and $5.8 million, or 3.52% increase on average in natural gas rates. This is the first base rate change requested by NSPW since 1998 for both electric and natural gas rates. The Company has received modest fuel cost increases in fuel rule proceedings since 1998. NSPW has 231,000 retail electric customers and 92,000 natural gas customers.
The electric rate increase drivers include an increase in decommissioning costs for nuclear plants in Minnesota, production and transmission cost increases, pension and benefit cost increases, and various increases in O&M costs.
The Commission decided the case at its December 22, 2005 open meeting. Based on the discussion the Commission authorized:
- 11% increase in electric rates.
- 2.5% increase in gas rates.
- 11% ROE.
Below is a brief summary of the issues CUB addressed in the case and the Commission’s decision regarding those issues.
Return on Equity
CUB Position: Reduce NSPW’s requested ROE of 11.9% to 10.25%. This would lower the company’s revenue requirement by $9.6 million for electric and $1.3 million for gas.
Commission Decision: Authorized ROE of 11%
CUB Position: Reduce NSPW’s equity levels from 56% to 51% for the test year. Reducing the equity level reduces customer rates because common equity is three times more expensive than debt. At a ROE of 10.5% reducing the equity level to 51% would reduce customer costs by $3.5 million.
Commission Decision: Authorized a capital structure range for common equity of 50% to 55%.
Load Management Goals
CUB Position: Require NSPW to work with Commission staff to develop goals for the company’s load management programs.
Commission Decision: NSPW to work with Commission staff to develop goals for the company’s load management programs.
CUB Position: Reject customer class revenue allocations in which residential customers would receive a 14.2% rate increase in favor of cost of service studies that would limit the residential increase to between 8% to 10.6%.
Commission Decision: Residential class to get higher than average increase in rates than other classes. The Commission supported its staff’s recommendation for rate increases of approximately 14.8% for residential; 9.9% for commercial; and 9.4% for industrial. The average residential customer will see a monthly increase of approximately $8.50 for electric service and $2.25 for gas service.