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Xcel seeks over 10% rate hike for natural gas delivery in North Dakota

The Fargo and Grand Forks utility's request comes as heating costs have soared recently due to high natural gas prices and the hangover from last year's Texas freeze. If approved, it will be the company's first rate hike in North Dakota in 15 years.

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Xcel Energy is pursuing a rate increase for its natural gas customers in North Dakota, in what would be its first such rate hike in 15 years.
David Samson/The Forum
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BISMARCK — The largest provider of natural gas in the Fargo and Grand Forks areas, Xcel Energy, is pursuing a 10.5% hike to the base rates for its North Dakota customers, a request that comes as households have seen an unrelated pileup of costs on their heating bills.

The bump to the Minneapolis-based utility’s natural gas delivery costs would be its first such increase in 15 years, a step the company said is important for addressing significant customer growth in North Dakota and to ensure safe and reliable heating. But their request also comes at an inopportune time for natural gas customers: The volatile commodity’s price hit some of the highest points in a decade last fall , and North Dakotans are still paying off the state’s $50 million tab from last year’s Texas freeze, which sent natural gas prices through the roof.

“Quite honestly, the timing is really unfortunate,” said Public Service Commission Chair Julie Fedorchak, who said state regulators will vet Xcel’s request and look for ways to cut it down in the upcoming rate case.

Of North Dakota’s three regulated natural gas providers, Xcel customers felt the biggest blow from the Texas cold snap , a result of the large volumes of gas the utility had to buy off the spot market over four unusual days last February. Xcel racked up nearly $33 million in costs from the February freeze, or about $240 for the average household — a price tag that prompted the PSC to call the utility back for a special investigation before ultimately approving its plan to recover those costs by spreading them out over two years.

While North Dakotans will be feeling the costs of the February storm for months more, utilities aren’t allowed to make profits off the sale of the natural gas itself. Fedorchak noted Xcel was likely gearing up for its request well before last year’s winter storm and said the commission has to keep in mind the costs for Xcel to safely and reliably heat North Dakota homes.

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The PSC, which oversees the state’s three regulated natural gas providers, will hold hearings later this year on whether to grant Xcel’s request, which totals $7.1 million and comes out to an increase of about $5.80 on the average household’s monthly bill. The regulatory body is scheduled to field public input on the request during two virtual meetings on Wednesday, Feb. 2.

Xcel has already been approved for an interim rate hike, a cost of about $5.50 a month to the average household, which went into effect in November. Though the PSC holds the authority to deny the utility’s request outright, such an outcome is extremely rare, and Fedorchak said their decision will more likely be a matter of degrees.

Why the increase?

Xcel is seeking an increase to its fixed charge for the delivery of natural gas, the section of the customer bills from which the utility is legally allowed to collect profits. The majority of customer costs result from what’s known as the “pass through” price of the gas itself, from which the utility can’t make any money, and which can fluctuate substantially from one day to the next.

Chris Clark, the president of Xcel Energy for Minnesota and the Dakotas, said much of the utility’s request is aimed at addressing a 40% increase in its North Dakota customer base since their last rate case, largely the result of the utility’s expansions into new and growing areas of eastern North Dakota, like the town of Horace .

The company also notes in filings before the PSC that most of its request addresses needed updates to ensure reliable delivery of natural gas, work that includes renewing old pipeline infrastructure and refurbishing three natural gas peaking plants.

“I think it's important to remember that it's been 15 years since we've filed a rate case in North Dakota,” Clark said. “Over those 15 years, we've provided a great value for our customers, but at the same time we recognize the need to make additional investments in our system to be able to provide that strong, safe, reliable service for the next decade and beyond.”

Still, one North Dakota group representing ratepayers argued Xcel is asking for more than it needs, noting increases to fixed charges make it more difficult for customers to control their energy bills.

Josh Askvig, state director for AARP of North Dakota, which intervened last year in a rate case for Montana-Dakota Utilities, called Xcel’s requested 10.5% increase “one of the most egregious we’ve seen around the country this year,” and said the utility’s $18.48 base rate is already too high. Xcel is also requesting a decrease to its return on equity, a figure used to calculate the fixed rate change, from 10.75% to 10.5% — a level Askvig said still puts it "on the very high end" nationwide.

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On top of the $7.1 million base rates increase, Xcel is looking to apply $1.25 million in holdover costs from the cleanup of an old natural gas plant in Fargo , an addition PSC public utility analyst Victor Schock said comes out to roughly 60 cents a month for the average household.

In Xcel’s two most recent North Dakota rate cases in 2004 and 2007, North Dakota customers saw an aggregate increase to their natural gas delivery rates of 3.3%, according to numbers provided by the utility. That compares to a 4.3% total increase between 2004 and 2010 for Xcel’s customers in Minnesota, the most recent approved increases there.

Fedorchak noted Xcel’s fixed rates help cover the costs of its pipes in the ground and the safety of gas transportation, adding, “you really can't shortchange your gas system.” But she also said the PSC will aim to shave the rate increase down to "as little as possible."

“We always aim to significantly decrease what the company is asking for,” she said.

If you go

The PSC will hold two virtual public input sessions on the Xcel request Wednesday, Feb. 2, at Noon and 5:30 p.m. Customers can watch the sessions at psc.nd.gov/public/meetings/live.php or listen over the phone by calling 1-888-585-9008, room code 671-872-185.

Those wishing to comment should call the PSC at 701-328-4081 to be placed on a list.

Written comments can also be submitted between Feb. 2 and Feb. 9, by email to ndpsc@nd.gov or by mail to Public Service Commission, 600 E. Boulevard Ave., Dept. 408, Bismarck, ND, 58505.

Correction: A previous version of this story incorrectly stated that Xcel is seeking an increase to its return on equity in North Dakota, a figure used to calculate the company's fixed rates. Xcel is requesting a decrease to its return on equity from 10.75% to 10.5%.

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Readers can reach Forum reporter Adam Willis, a Report for America corps member, at awillis@forumcomm.com.

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