For Immediate Release: December 7, 2017
More Information: Tom Content, 608-251-3322 x. 12, 414-550-4712 (cell)
CUB: Xcel Energy customers face higher
fixed fees, PSC misses opportunity to rein in monopoly profits
MADISON, Wis. — Xcel Energy customers will see higher utility costs, including an electric rate hike for the ninth straight year, in 2018. A decision Thursday by the state Public Service Commission didn’t go far enough to reduce the utility’s profit or rein in high fixed charges for the utility’s customers, the Citizens Utility Board said.
The PSC decided to increase electric rates by 1.4%, with residential customers expected to see an increase of 2% and small business customers expected to see an increase of 1.5%. Local natural gas charges will also rise, by 8.3%.
But the commission missed a big opportunity to bring down profits for Xcel and its Northern States Power utility, which serves La Crosse, Eau Claire and other parts of western and northern Wisconsin.
The PSC set the utility’s profit, or return on equity, at 9.8%, down from its current level of 10%. CUB’s expert assessed the utility’s financials and concluded a return of 9% would have been appropriate.
“It was disappointing to hear members of the Commission say they found CUB’s arguments for a 9% return to be convincing, yet still vote for the smallest possible adjustment that could be justified based on the evidence in this case,” said Tom Content, CUB executive director.
CUB’s expert and Commission staff presented evidence that financial models and market trends have resulted in lower utility returns nationwide. While it expressed a desire to align returns for Wisconsin utilities with the market, the Commission ultimately argued that the principle of “gradualism” dictated a much more modest adjustment.
“What we saw in this case in that the downward trend in utility returns that we’ve seen over the last few years has continued. But the meager adjustments the Commission has been making to utility profits have been outpaced by market trends, Content said
“Wisconsin utilities’ profits have been far above the national average for too long, and only recently have begun to be brought down closer to the national average,” Content said. “Given the state of the economy and sustained low interest rates and the risk profile for Wisconsin’s utilities, these last few years represent a lost opportunity to produce tangible savings for customers by bringing profits in line with those earned by utilities in other states.”
CUB’s proposal of a 9% return would have produced tangible savings of at least $10 million for Xcel customers. While the return in 2018 will be below 10%, it’s still above the national average, which was 9.7% in 2016. Most other Wisconsin utilities continue to have their profits set at 10% or higher.
The other key decision made today was to enact another increase in the fixed customer charge for Xcel’s Wisconsin customers.
Xcel proposed a whopping 115% increase in the electricity fixed charge two years ago, and when it didn’t get everything it sought it came back for more this year. The fixed charge in January will go up to $17 a month for Xcel customers, the full amount requested by Xcel, up from $14 today. CUB argued to keep the fixed charge at $14.
“Xcel customers came to the public hearing and objected to the increase, and we argued that the customer charges should stay where they are because the current rates are supported by the full range of evidence in this case. In siding all the way with the utility on increased fixed charges, it feels like the Commission is consistently applying its gradualism principle in a way that favors the utilities at the customers’ expense,” said Content.
What’s striking, CUB noted, is the contrast between the stance of Wisconsin regulators on fixed fees and the actions of regulators in other states, where fixed fees are not climbing significantly. As an example, an Xcel customer who lives in a three-bedroom house in Minnesota just across the river from Hudson is paying a lower fixed fee than last year. But the owners of a similar home on the Wisconsin side of the river are seeing a 21% increase in their fixed fee come January
(Attention Reporters and Editors: An audio replay of the PSC meeting is available through this evening at psc.wi.gov.)