Electric and gas rates set to rise across Minnesota

It's been a busy few weeks at the Minnesota Public Utilities Commission. The PUC is charged with approving the rates that the state's regulated utilities can charge for their electric and natural gas service. 

And right now, the state's biggest electric and gas utilities are all requesting rate increases. 

"It's definitely a lot of these happening at the same time, more than normal,” said Annie Levenson-Falk, executive director of the Citizens Utility Board, which advocates for the state's residential utility customers. 

It’s not just the number of rate requests that’s notable. "These are really, really large rate increase requests, much larger than you would typically see,” said Levenson-Falk. 

Xcel Energy, the state's largest electricity provider, is asking for a rate hike of about 21 percent over three years. That would mean a monthly increase of between $12 and $21 for the typical residential customer. 

Meanwhile, Duluth-based Minnesota Power, the state's second-largest utility, is asking for an increase of about 18 percent. That equates to about $15 a month extra for a typical household.

But bills won’t go up that much immediately. It will take the commission over a year to decide on those rate requests. 

In the meantime, the PUC approved smaller, interim rate hikes. On Jan. 1, customers of both Xcel and Minnesota Power will see their typical residential bills increase by about $5 to $6 per month. 

The utilities initially asked for significantly larger interim rate increases. But in an unusual move, the PUC made a special finding of what’s called “exigent circumstances.”

“The PUC recognizes that some folks are really struggling with affordability of energy right now,” Levenson-Falk said. “And they want to do everything in their power to help folks be able to continue to afford their electricity and gas.”

Meat and potatoes investments

The state’s major utilities say they need the additional revenue to support their transitions to carbon-free technologies like wind and solar. 

“Our full electric rate proposal enables us to deliver a better product for our customers, maintaining and enhancing our infrastructure to ensure reliable service while supporting our efforts to give customers more of what they want — cleaner energy, more ways to manage their energy use and bills that stay low now and over the long-term,” Xcel spokesperson Matt Lindstrom said in an email. 

Minnesota Power, which serves northeastern Minnesota, generates about 50 percent of its electricity from carbon-free sources — up from only about 5 percent in 2005. 

The utility’s vice president of customer experience Frank Fredrickson said investment is needed to modernize the electric grid that transports energy from where it’s produced to where it’s needed. 

The utilities also want to make up for lost sales. Minnesota Power sells a majority of its electricity to big industrial customers like iron ore mines and paper mills, and some of those customers slashed their production early in the pandemic. One, the Verso paper mill in Duluth, closed indefinitely last summer.

Many households are also using less electricity because of energy efficiency improvements. 

"So, although that does lead to lower sales, there's still a requirement to have a robust and reliable system that's in place to meet our energy needs at any waking moment," Frederickson said. 

On the natural gas side, utilities also say rate increases are justified to help upgrade critical infrastructure. 

"The request that we're making to the commission is pretty much to recover the costs of some meat and potatoes type investments in our system,” said Ross Corson, spokesperson for CenterPoint Energy, the state’s largest natural gas utility. 

Corson said the utility needs to replace aging pipes to maintain safety and reliability in its 14,000-mile-long system. 

"The additional revenue that we need is to meet more stringent federal regulations for pipeline safety, and also to invest in the continued safety and reliability of our pipeline system." 

The interim rate hikes the Public Utilities Commission approved for CenterPoint Energy and Xcel, the state's two largest natural gas utilities, are relatively modest — about 60 cents a month for Xcel customers, and about $2.50 a month for households served by CenterPoint.

But customers are already paying more to cover a huge spike in natural gas prices that occurred in February, caused by a historic storm in Texas. 

The PUC initially approved a plan to spread out the $660 million tab from that storm over 27 months. 

This month, in addition to approving the interim rate increases, the commission also extended that surcharge repayment period to 63 months. 

That significantly lowers the monthly cost for ratepayers. A typical CenterPoint customer, for example, will see that surcharge go down from about $13 per month in 2022, to about $4.60 a month. 

‘More people struggling’

The combined increase in both gas and electric utility bills will hit lower-income people especially hard, advocates say.

A typical residential household spends about 3 percent of their income on energy costs. For many low-income people, that figure often exceeds 10 percent. 

"And I think what we're going to see is more people struggling, and choosing between food, clothing, housing costs and paying their energy bills," said Pam Marshall, executive director of the Energy CENTS coalition. 

Her group worked with the electric utilities to get them to agree to lower interim rate increases, to soften the blow on their most vulnerable consumers. 

Still, Marshall fears that when the rate increases go into effect, more Minnesotans will fall behind on their utility bills. 

Already, about 1 in 8 Xcel and 1 in 10 CenterPoint customers are behind on their bills.

Annie Levenson-Falk said it’s not uncommon for people to call the Citizens Utility Board saying they’re hundreds, if not thousands of dollars behind on their bills. 

“If you find yourself in that situation, you're not the only one in that situation,” she said. “It's something that people face from time to time, and there is a way out of it.”

There is help available to pay those bills and people don’t have to fall behind on their payments in order to qualify for aid. A good place to start is the Minnesota Energy Assistance Program, or by calling 800-657-3710.