WisBusiness: PSC Approves 11 Percent Rate Hike for Xcel

By Brian E. Clark


MADISON – The state’s Public Service Commission on Thursday approved an 11 percent electricity rate hike for Xcel Energy, which serves much of northwest Wisconsin. The company had requested a 15 percent hike.

The commission also granted a 2.5 rate boost for natural gas, half of what Xcel wanted. Both increases should go into effect in early 2006.

The decisions mean average Xcel Energy residential customers will see a jump of about $8.50 for electric service and $2.25 for gas service in their monthly bills.

In addition, the commission set an 11 percent return on equity for Xcel Energy shareholders, down from the company’s 11.9 percent increase.

Charlie Higley, executive director of the Citizens Utility Board, said he was pleased that the commission had “knocked down” the utility’s requested increase.

“It wasn’t all they asked for, so it is a step in the right direction,” he said. “But it’s still a lot.”

Higley also said he was disappointed the commission allowed the utility a return of 11 percent. “We thought it would be fair if they gave them a return of 10.25 percent.

“I think anyone who invests in the stock market would be happy with that. But at least they didn’t give them all they wanted.”

In a statement, the commission said the rapidly rising cost of natural gas was responsible for much of the rate hikes.

From November 2004 to November 2005, natural gas prices almost doubled, rising from $6.67 per decatherm to $11.31 per decatherm.

In a statement, Xcel officials said the increases are also needed for major electric and natural gas system improvements for its growing customer base in northwest Wisconsin.

The company said this is the first time since 1998 that it has increased base rates for capital and operating expenses, other than periodic changes for the cost of fuel.

When new rates are finalized, Xcel Energy residential electric and natural gas customers will continue to have the lowest rates of all major utilities in Wisconsin, officials said.

“We understand that any rate increase will be difficult on some of our customers, especially at a time when energy costs continue to rise,” said President Michael Swenson, president and CEO.

“Over the years, we have been able to maintain our low rates by reducing costs, creating efficiencies and minimizing expenses. However, these base rate increases are needed to allow us to invest in our system, maintain reliability and meet the energy needs of our customers now and in the future.”

From 1994-2010, he said the number of electric customers Xcel Energy serves in Wisconsin is forecast to increase by 27 percent and the number of natural gas customers is expected to increase by 65 percent. During that same time, overall electric use is projected to increase by 34 percent.

In other action, the commission approved We Energies request to make a $5 million donation to the Keep Wisconsin Warm Fund. The contribution will help pay the utility bills of low-income customers