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Mike Nowatzki, Forum News Service, Published January 07 2014

Sticking point for ND regulators emerges in proposed Xcel rate hike

BISMARCK – A meeting between Xcel Energy officials and North Dakota utility regulators here Tuesday shed light on a major point of contention sure to arise again as the company seeks approval of a sweeping proposal that would boost rates for its electricity customers.

Xcel’s proposed settlement agreement filed last month with the Public Service Commission would increase electricity rates by 5 percent each year in 2013, 2014 and 2015, and hold rates flat in 2016.

If the new agreement is approved, Xcel’s residential customers in North Dakota will receive an average refund of $21 for 2013 because the proposed 5 percent rate for 2013 is lower than the 8 percent interim rate they’ve been paying since February.

Since last February, the commission has been considering a separate rate increase of 9.25 percent proposed by Xcel for 2013. The new agreement between Xcel and PSC advocacy staff would replace that earlier proposal.

One part of the agreement that emerged during Tuesday’s informal PSC hearing as a major sticking point would allow Xcel to keep using its current methodology of spreading out production and transmission costs among states where it does business.

For years, North Dakota regulators have grumbled that Minneapolis-based Xcel is subjecting its North Dakota customers to Minnesota’s energy policies and regulations – and higher costs.

The commission has been mulling a change in the methodology – the so-called “demand allocator” – that’s been used by Xcel for the past 20 years because it would save the company’s North Dakota customers $20 million a year. Xcel would likely appeal such a change to the state Supreme Court.

To head off such a change, Xcel is proposing a study to compare different methodologies and report the findings to the commission by July 1. The information would be used in the company’s next electric rate application, which couldn’t happen until 2017.

A formal hearing on the agreement is scheduled for Jan. 23.