State regulators approve 9 percent electric rate increase for Xcel Energy

State regulators on Thursday approved an increase in electric rates for Xcel Energy customers that’s far smaller than Xcel had requested.

The Minneapolis-based utility originally sought to increase its electric rates by 21 percent, or $677 million, over three years.

Xcel later reduced its request to $440 million over three years. The Minnesota Department of Commerce and an administrative law judge recommended a smaller amount.

After several days of hearings, the state Public Utilities Commission approved a rate increase of 9.6 percent over three years, or $306 million — less than half of Xcel's original request.

Initial estimates indicate Xcel's final rates will be lower than the interim rates it's currently charging, meaning most customers will receive a refund.

Xcel has said it needs the increase to cover the costs of replacing an aging electrical system as it transitions to more renewable energy. But it comes at a time when many Minnesotans are struggling to pay rising utility costs.

Xcel, Minnesota’s largest electric utility, serves about 1.3 million customers in the state.

The Public Utilities Commission also set a higher return on equity for Xcel of 9.25 percent, although less than what the utility requested. Return on equity is the measure of a company’s net income divided by its shareholders’ equity, and is a gauge of a corporation’s profitability.

The commission also reduced the monthly basic charge for residential and small business customers, and limited the amount Xcel can compensate its top executives.