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Xcel Energy requests increase in natural gas distribution rates

MINNEAPOLIS - Xcel Energy today asked the Minnesota Public Utilities Commission to authorize an increase in natural gas distribution rates. The company is seeking an increase of $9.9 million in annual revenue, representing an increase of 1.7 percent.

If the request is approved, a typical residential heating customer will see an increase of approximately 3.7 percent, or $2.76 per month. Under the company’s proposal, most commercial customers will see a small decrease in their monthly bill.

Xcel Energy has not requested a rate increase in Minnesota during its four years of existence, and predecessor Northern States Power Co. last increased natural gas distribution rates for Minnesota customers in 1998. In 2000, the company agreed to freeze natural gas distribution rates through 2003 as part of the merger settlement agreement approved by the commission.

“This rate request addresses our efforts to control costs and manage price volatility for our customers," said Dave Sparby, vice president, government and regulatory affairs for Xcel Energy.

“We have worked hard to prudently manage our costs, with annual increases to us of only 0.3 percent per year. However, a rate increase is needed to help us continue to provide safe and reliable service for our 400,000 Minnesota natural gas customers.”

The proposed rate increase is not related to fluctuations in the wholesale cost of natural gas, which has been the primary reason for increases in heating bills during the past few years. Approximately 75 percent of a customer’s bill covers the wholesale cost of natural gas, and Xcel Energy makes no profit from that part of the bill.  The wholesale cost of natural gas is determined by national market conditions, and whatever Xcel Energy pays for the fuel is what customers pay. 

“We have built a diverse supply portfolio that allows us to minimize the impact of higher supply costs on our customers,” Sparby said.

Xcel Energy’s distribution rates make up almost one-fourth of a customer’s overall bill and include costs for local distribution gas lines, service lines to individual homes and businesses, local natural gas storage facilities, meters and meter reading, billing and other operating expenses such as employee wages and benefits.

As part of the rate filing, the company proposes to increase rates on an interim basis on Dec. 1, 2004. Those rates will remain in effect until the commission decides the case, most likely next summer. Final rates will be implemented following the commission’s decision.

Customers and other interested parties will have an opportunity to comment on the proposal at public hearings the commission is expected to schedule for early 2005. The commission later will decide whether rates will be increased.