Xcel Energy customers could see gas and power bills grow again next year as the utility seeks to change the way consumers pay for electricity.
The Minnesota-based utility is expected to ask regulators to authorize an additional a 3.9 percent increase to electricity revenues for 2016 and a 5 percent increase to natural gas charges for about 255,000 Wisconsin customers.
For the typical residential customer, that translates to an extra $4.73 a month for electricity and $3.02 more for gas, according to Xcel.
Rather than increase the cost per kilowatt hour, Xcel is following the example of several other large utilities in asking to increase the flat fee applied to all residential, farm and small commercial bills.
If approved, the customer charge would more than double -- from $8 a month to $18. In return, Xcel would reduce the average rate by about 0.7 cents per kilowatt hour.
Critics say increasing these flat fees unfairly penalizes those who use less energy and creates a disincentive for home-based alternatives like solar panels.
“Increasing fixed charges jacks up the cost of electricity for people in small apartments and those who are trying to conserve,” said Kira Loehr, executive director of the Citizens Utility Board, which represents the interests of residential and small commercial customers. “It hits those who use less and makes them pay more. That’s the exact opposite of what we think should be happening.”
According to figures provided by Xcel, the cost shift will mean an increase of less than $7 a month for the majority of customers. But about a quarter will see their bills rise by more than 10 percent.
“It encourages increasing consumption, which raises costs for everybody in the long run,” Loehr said.
While acknowledging it favors big users, Xcel defends the practice, saying customers should pay for the wires that bring energy to their homes.
“The nature of the electric grid is going to change,” said Don Reck, regional vice president of rates and regulatory affairs. “The grid is there and costs something regardless.”
As the cost of solar panels drops, more customers are generating their own electricity, drawing utility power during down times and pushing excess electricity back onto the grid.
Xcel would rather those customers buy electricity from the utility, Reck said. “We’re trying to make ourselves the provider of choice.”
Xcel is not alone in the shift.
In the past two years, three of the state’s five largest investor-owned utilities have significantly hiked customer charges. Madison Gas & Electric went from $8.70 a month in 2012 to $19 this year. Wisconsin Public Service nearly quadrupled its charge.
The three-member board is likely to support Xcel’s request.
Eric Callisto, the lone commissioner in recent years to vote against fixed charge increases, left the board in February. He was replaced by former Secretary of Administration Mike Huebsch of West Salem.
Xcel did not specify what increase it would seek for industrial electricity rates, but the trade organization representing the state’s largest power users expects it will be somewhat lower than the 4 percent overall revenue bump.
“None of our members like to see rate increases. That said, we know Xcel has some costs from transmission lines and Minnesota generation plants,” said Todd Stuart, executive director of the Wisconsin Industrial Energy Group. “We’ll work with the utility and PSC staff over the coming months to see if the request is reasonable and if we can scale it back.”
Xcel says the additional $27.4 million in electricity revenues will not increase profits but will pay for major investments -- including two new wind farms and a portion of CapX2020, the high-voltage transmission line under construction between the Twin Cities, Rochester and Holmen.
Other capital projects include upgrades to the Prairie Island nuclear plant in Minnesota, a substation in Blair, Wis., that serves nearby sand mines and about $2 million to refurbish one of three oil-burning generators at the French Island waste-to-energy plant to meet peak demands.
In 2012, when Xcel was seeking approval for the $211 million segment of CapX2020 between Alma and Holmen, the utility argued against using the French Island generators, saying they would require truckloads of fuel for extended use.
Xcel boasts that more than half its electricity portfolio is carbon free: 29 percent is nuclear generated and about a quarter comes from wind and other renewable sources. That’s significantly better than Wisconsin utilities as a whole, which generate about 85 percent of electricity with fossil fuels -- primarily coal.
In the coming year, Xcel plans to offer community solar gardens, a model that has proven popular with electric co-op customers in Vernon County.
Consumers expect reliable, safe and reasonably priced electricity, Reck said. “More and more, they’re expecting it to be environmentally friendly.”
This marks the seventh straight year Xcel has requested an electric rate increase. Regulators last year approved a 2.2 percent overall increase after Xcel asked to raise rates by 3.2 percent.
Since 2001, the average customer bill has risen by about 25 percent after adjusting for inflation.
Still, Xcel’s residential prices are the second-lowest among the state’s five large investor-owned utilities; an average residential bill is $96.13, compared with an average of $103.17 for the five major utilities.
Xcel is also asking for an additional $5.9 million in natural gas revenue, which would pay for upgrading pipes and ongoing environmental cleanup costs at a former gas plant in Ashland, Wis.
If approved, that would translate to an increase of about $3 a month for the average customer, according to Xcel.