State officials want Xcel rate hike dramatically reduced

Xcel Energy is trying to make a case for a $16.2 million annual rate hike for its natural gas service, but the proposal has failed to get backing from state energy officials.

The Minnesota Department of Commerce's Office of Energy Security said Monday it is recommending a natural gas rate increase of less than $2 million for Xcel -- 85 percent less than the utility's proposal.

An administrative law judge will take the Office of Energy Security's recommendations into account along with comments from other interested parties. The judge will then make a recommendation to the state Public Utilities Commission.

The commission is expected to decide later this year on the Xcel natural gas rate hike proposal.

In its recommendation, the Office of Energy Security said Xcel will be able to provide reliable service with a smaller rate hike. And officials said Xcel overestimated some of its costs and could find other ways to reduce costs, thereby reducing the need for a large rate increase.

Xcel said in a written statement that officials were disappointed with the Office of Energy Security's recommendation.

"We believe our request reflects the costs needed to operate our natural gas business," the statement read. "We continue to look forward to the opportunity to demonstrate the reasonableness of our request in this proceeding."

Xcel has argued that the rate hike of about $2.71 per month per household would help the utility recover the costs of investments to its natural gas system in addition to accounting for increased operating costs.

Xcel Energy has 426,000 natural gas customers in Minnesota and operates more than 8,700 miles of natural gas mains and distribution lines in the state.