We understand that most customers are primarily concerned with the affordability and reliability of the products and services we provide. Even as we continue to modernize our infrastructure and bring more renewable energy onto our system, we have kept our retail electricity rates competitive with rates across the country and in the states we serve. We offer energy assistance programs for customers in need and also contribute funding to state and local energy assistance agencies each year.
The Regulatory Compact
Our utility subsidiaries operate under carefully regulated conditions, which are determined in part by state public utilities commissions. A utilities commission is a governing body that regulates the rates and services of utilities such as ours. In exchange for the exclusive right to provide electricity and natural gas services in certain regions, we agree to the following:
- Duty to serve: We will provide service to any residence or business within our service territory that requests it under reasonable terms and conditions. Utilities cannot pick and choose their customers.
- Cost of service pricing: Pricing for our services is regulated by the costs we incur to deliver them. We cannot arbitrarily raise prices to levels beyond our costs.
- Resource planning process: Every few years, we go through a process to determine the resources necessary to serve customers’ future energy needs. Resource plans must be reviewed and approved by regulatory commissions, and stakeholders are given the opportunity to provide input on the plans through a public process.
e21: A regulatory framework for the future
Xcel Energy is part of a diverse group of stakeholders working on recommendations for how to better align Minnesota’s regulatory framework for electric utilities with changing policy goals, customer expectations and advanced technologies.Details
Together, this is known as the regulatory compact. As a participant in the compact, we are granted the ability to recover our costs of doing business and earn a reasonable rate of return. This rate of return is not guaranteed—we have only the opportunity to earn it, and in some years we do not achieve the rate. To operate effectively in a closely regulated business like ours, it’s imperative that we stay in sync with the current demands of the public and policymakers.
The changes taking place within our industry will require that we further develop the current regulatory model. The electric system or “grid” that serves our customers is undergoing a transformation as advanced energy technologies become more viable and as customers demand new and expanded energy options. Our policies must consider this change, and the rules that govern our industry will need to keep pace and evolve as demands on the grid grow. We must be able to continue investing to ensure the grid can serve its purpose, providing the network and support to connect customers with the energy services they need and want.
Managing Operations and Maintenance Costs
We are focused on better managing costs by increasing productivity and becoming more efficient. In 2014, we publicly committed to limit the company’s operations and maintenance cost growth to 2 percent or less annually. Since 2011, we have been successful in bending the company’s cost curve—reducing annual cost growth from an average of 6 percent between 2007 and 2011 down to approximately 3 percent between 2011 and 2014. We remain focused on simplifying and automating business processes while taking full advantage of new systems and other technology. Our consistent focus on operational excellence will ensure continuous improvement, helping improve quality without dramatically raising rates for consumers.
Productivity through Technology
Productivity through Technology (PTT) is an initiative we started in 2011 to help us solve our workforce challenges, make smart investments and minimize customer price increases—all while improving service reliability. PTT is about removing roadblocks that are preventing our employees from being productive by providing them with new tools and ways of working. The work is driven by a cross-functional project team of more than 150 employees, as well as a change network of about 150 leaders from all business areas. The change network is critical as it helps proactively lead the change throughout the company.
Currently we are focused on building a new general ledger as well as a new work and asset management (WAM) system, both using the SAP technology. The new general ledger will standardize and simplify financial accounting and reporting to enable us to make better business decisions. WAM will address the way we do business from start to finish, allowing us to standardize operations. Together, these efforts will enable us to be more competitive and meet our customers’ expectations.