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Patrick Springer, Published December 13 2013

Xcel seeks to hike ND electric rates 5 percent per year over 3 years

FARGO – Xcel Energy filed a sweeping proposal Friday to increase electricity rates by 5 percent per year over three years and hold rates flat in 2016, part of a broad settlement offer.

The proposal will be reviewed by the North Dakota Public Service Com-mission, which has been considering an electricity rate application increase by Xcel for 2013 since last February.

The proposed agreement, which the utility and regulatory staff call historic in its scope, would scrap a proposed 9.25 percent electricity annual rate hike that Xcel expected to follow with another sharp increase for next year.

The four-year rate plan would smooth the increases, which Xcel said are required in order to pay for significant investments to upgrade and expand its power generation and transmission capabilities.

If approved, rates would increase next year by 5 percent, or about $3.75 a month for a typical residential customer who pays $70 to $80 monthly for electricity. A similar increase would follow in 2015, but then rates would not increase in 2016.

The proposed 5 percent increase is lower than the 8 percent interim rate increase Xcel electricity customers in North Dakota have been paying since last February.

If approved, the 5 percent hike would also be effective for 2013. As a result, Xcel residential customers will be getting an average refund of $21, probably in the second quarter of next year, said David Sederquist, a senior regulatory consultant for Xcel.

“Now we’re kind of settling in at a lower rate,” he said.

Brian Kalk, president of the Public Service Commission, was irritated that the proposed settlement has surfaced months into discussions about rates and new power generation options proposed by Xcel.

The large number of pending proposals, which include new wind farms and natural gas peaking stations as well as electricity rates, was becoming in-creasingly unwieldy, Kalk said.

“We’ve been working on this stuff for the better part of a year,” he said. “Magically this settlement drops out of the sky.”

Kalk was taken aback when Xcel recently backpedaled on its proposal for two natural gas peaking plants near Hankinson, each with a capacity of 215 megawatts, to generate power during peak demand.

Xcel is considering a third natural gas peaking station, also 215 megawatts, in suburban Minneapolis.

After requesting proposals from independent power producers, Xcel re-ceived an attractive natural gas bid from Mankato. The utility plans to move ahead with that proposal and its suburban Minneapolis peaking plant.

Because both locations already generate power with natural gas, they have the pipeline and electricity hookups already in place to accommodate added capacity.

The site near Hankinson, by contrast, would require additional invest-ment, and therefore cost more to produce electricity for customers, said Steve Wishart, Xcel’s director of resource planning.

Utilities are required to select the lowest-cost alternative for customers, he said.

Xcel is moving ahead with its application for four large wind farms, with a combined capacity of 750 megawatts, including two in North Dakota totaling 350 megawatts.

Mike Diller, director of economic regulation at the Public Service Commis-sion, said Xcel’s proposed settlement would give North Dakota more lever-age in dictating power generation for consumers.

“This comprehensive settlement will allow North Dakota to have its own resource mix,” Diller said, including generation from fossil fuels, nuclear power and wind.

“It’s a sea change in the way we’ve been doing business in the last 100 years,” Diller said, referring to the possible four-year rate period, which he acknowledged would be a “tough sell” with commissioners and the public.

North Dakota regulators have long complained that Xcel executives in Minnesota, responding to requirements and regulations in that state, have imposed Minnesota standards – and costs – on North Dakota consumers, Kalk said.

“None of these are approved yet,” Kalk said of the Xcel rate case and pend-ing determinations of power generation proposals.

A sore point for Kalk is Xcel’s plan to put the Hankinson units on hold, meaning they probably will not be built for the next seven to 20 years, when North Dakota has abundant natural gas supplies.

But the agreement would require Xcel to build 400 megawatts of thermal power – generated from gas or coal, for instance – in North Dakota by 2036, Diller said.

Readers can reach Forum reporter

Patrick Springer at (701) 241-5522