Monday, December 12, 2022

My Speech that I delivered on Xcel's 21% rate hike proposal


Back in May of 2019, at the early stages of their resource planning process, then Xcel CEO Ben Fowke said their proposed changes wouldn't lead to significantly higher customer utility bills beyond the cost of inflation. Now that I see Xcel’s increase request of 21.2% (or $677.3 million) over a three-year period, that makes me wonder what’s changed.

Having attended numerous rate case hearings, I have seen the pattern of what is at play here:

It is the industry standard for the utility to ask for a far bigger rate hike than they could justify, as a negotiating tactic to move the goalposts in their direction. And like clockwork, just because the PUC eventually doesn’t grant the utilities’ FULL request, the media will spin this eventual outcome as “a win for the people” while the utility gets what they actually intended to all along. 

It is true that we can’t take energy for granted, and it is true that Xcel does need some capital to provide upgrades and reliable service. 

But what Xcel does not need is an increase in their guaranteed shareholder profit to 10.2% — up from 9.06% currently while 1 in 8 residential Xcel customers are currently behind on their bills. The increase in profit for shareholders alone costs Minnesota $87 million just in the first year and more in following years.

Xcel experienced an 8.4% profit growth last year, reporting 1.6 billion in record profits, having the 8th highest paid executive in MN last year, and the 2nd highest CEO-to-median-worker pay ratio among US utilities (139 to 1) apparently at the same time as disconnecting 16,693 residential customers due to an inability to pay.

Why should we pay an average of $140-$240 more per year or ~$15 to $21 per month when Xcel hasn’t paid federal income taxes in over 14 years as CBS News reported

In evaluating what Xcel CEO Bob Frenzel should be rewarded for, as the electric utility for at least Minneapolis and much of the west metro, Xcel would have great business savvy and expand its rate base by supporting beneficial electrification efforts taking some market share away from our gas company. But the CEO sits on the board of the American Gas Association which had a conference in Minneapolis last month and is specifically targeting the High-Efficiency Electric Home Rebate Act in its ongoing campaign against electrification.  

The company has claimed back in 2013 that being able to promise profits is needed to attract top talent. We should limit the lining of Xcel’s shareholders pockets unless the company shows equal enthusiasm for making actual updates to the grid that would allow for Minnesotans to participate in and own clean energy, efficiency, and storage. 

Here is the prism for which the PUC to view whether Xcel’s capital costs are responsible and prudent: 

If Xcel simply spends more on replacing old equipment rather than upgrading it, then it locks in an outdated system that I fear can't accommodate local clean energy for decades. 

In my comments on Xcel’s 15-year integrated resource plan, I recommended that an approach of strategically sizing and siting new renewable power generation to fit within the existing capacity of each adjacent substation as a way to save customers money by making fewer million dollar per mile high voltage transmission lines necessary. 

Such a distributed approach to renewable power would even out supply, increase reliability and thereby make gas plants less necessary and thereby be a save for customers but it was not fully reflected in their recent integrated resource plan. Xcel has had opposing incentives to this distributed model because it would make it harder for Xcel to keep new renewable power under their market share, while new HVT lines and gas plants are infrastructure that utilities get guaranteed profits on. 

This increase in total residential electric bills by an average of $140-$240 per year can really make a difference for a household on electric heat who can no longer afford to increase the temp in their house above 64 degrees, are on a fixed income and in a drafty home that needs repairs.

On Thursday of last week, I attended a hearing at the PUC where the commissioners passed up an opportunity that would have helped make these very same needed home repairs more accessible to a greater number. We had a room full of community members and organizations who all wanted more resources for low-income energy efficiency, but sharply disagreed on whether to pilot a new inclusive financing approach or to only expand existing CIP programs. So, the PUC settled things by finding a way to let everyone down.  

Because of a need for a social safety net, it’s hard to argue for any benefits of increasing rates until I am more assured the PUC is willing to be an ally in relieving energy burden. 

I’d recommend rejecting at least the 15-18% increase in the flat monthly fixed fee because it cannot be reduced by using less energy. This monthly base charge for residents would make residential and lower income customers bear a disproportionate share of the increase compared to commercial/industrial customers and harm low-wealth households disproportionately.

Xcel may argue that this unprecedented rate increase is a necessary reward for the company’s mission to add renewables and meet carbon free pledges. I have to be careful in how I address that because building more renewable capacity will actually raise rates less than doubling down on the status quo. 

We are coming to an inflection point in our decades-old social contract. Utilities are wanting to obligate ratepayers to pay off the stranded costs of the old system at the same time as investing in the new. Organizations like the Center for the American Experiment will try to use that to make an inaccurate claim that adding more renewables are responsible for rate hikes when they overlook the whole other half of the ratemaking equation. In contrast, Xcel’s spokespeople have rightly pitched renewable power as a way to keep rates low. 

 I am curious why Xcel’s political action committee is contributing heavily to state level candidates who oppose legislation holding other utilities accountable to the carbon free standards they laud as good for Xcel. This makes it hard to know who to trust. The PAC is paid voluntarily by upper lobbyist level Xcel employees who ultimately get paid from our ratepayer dollars. 

I’d say reject much of this rate increase until Xcel comes back with a proposal that updates our electricity grid in ways that will actually be useful, affordable, and accessible to communities and the clean energy transition we know is needed to shield us against unstable fossil fuel costs, and climate change.