State agencies and consumer advocates are asking Minnesota utility regulators to reconsider a decision allowing Xcel Energy to raise electric rates on customers.
The Minnesota Public Utilities Commission (PUC) in July allowed Xcel Energy to raise electric rates for 2025 and 2026. The decision will allow the state’s largest utility, which provides electricity to the Twin Cities metro and parts of southern Minnesota, to collect an additional $210 million from ratepayers.
The average Xcel residential customer will see bills rise about $5.60 per month.
But the rate increases may not be set in stone. Minnesota Attorney General Keith Ellison and the consumer advocate group Citizens Utility Board are asking the PUC to reconsider, specifically arguing that it erred in allowing Xcel to earn a greater share of profits on infrastructure investments.
The PUC has until Oct. 19 to decide whether it will take up those official petitions.
The rate case decision comes as energy costs are rising in Minnesota, which just wrapped up its fifth warmest summer on record, according to meteorologists at Fox 9. It attracted thousands of comments from everyday Xcel customers, who overwhelmingly urged the PUC to reject the increases, according to an analysis of roughly 4,000 comments by the Citizens Utility Board.
“People are very concerned about energy affordability, and people are struggling to pay their energy bills,” said Gabe Chan, a professor at the University of Minnesota who offered expert testimony in the rate case.
How rate cases work
Large utility companies like Xcel Energy have monopolies over the areas they serve, and are subject to regulation from the PUC. If the company wants to raise its prices, it must petition the PUC to do so.
Xcel initially petitioned the PUC in 2024 to raise electric rates by roughly 13% over the course of two years from 2025 to 2026. In January 2025, the PUC set a temporary rate increase of 5.2% while the case was decided.
Chan said it’s common for utility providers to argue they need to add new infrastructure to ensure reliable service and to meet regulatory requirements to transition toward cleaner energy sources when asking for rate increases. Those infrastructure investments are the crux of Xcel’s application to raise rates.
“Rate requests support investments needed to modernize and strengthen the electric grid, replace aging infrastructure, maintain our carbon-free nuclear fleet, connect new renewable energy resources and prepare for growing demand for electricity,” Xcel spokeswoman Megan Boldt said in a statement. “We recognize affordability is top of mind for customers, and they expect reliable, safe electric service.”
There are inflationary pressures contributing to rising costs of electricity nationwide, Chan said. Basic infrastructure like wires, poles and transformers are simply more expensive today.
When rate cases are decided, the PUC can set new requirements to regulated providers aimed at improving service, helping customers boost energy efficiency, or providing benefits to low-income customers.
The Xcel rate case saw the PUC cap the company’s ability to recover executive compensation from ratepayers, waive late payment charges for low-income customers, establish an arrears program for customers with long-term past due bills and establish automatic enrollment in a bill assistance program for qualifying households.
“A rate case is made up of dozens of individual decisions and they made some really good ones,” Annie Levenson-Falk, executive director of the Citizens Utility Board, told Sahan Journal.
The final rate increases allowed by the PUC were 2.3% for 2025 and 3.4% for 2026. Because those rates are lower than the 5.2% interim rate set by the PUC, Xcel customers will receive a refund on a future bill.
Return on equity drives rate increase
Part of what’s driving the increase in Xcel electric rates is known as return on equity, a percentage the provider is allowed to recoup on infrastructure investments.
Xcel previously had a return on equity of 9.25%, but asked the PUC to raise that rate to 10.3%. The commission opted to set a 9.6% return on equity. That decision prompted appeals from the Attorney General’s Office and the Citizens Utility Board, who say the evidence doesn’t support granting the increase.
Increasing return on equity is a major factor that will increase customers’ bills, Levenson-Falk said, adding millions per year onto bills that don’t pay for truly providing electricity. The increase is projected to add $34 million annually to ratepayer bills in Minnesota.
“The order didn’t discuss the ratepayers’ ability to pay the rates needed to fund a [return on equity] of 9.6%,” she said.
Xcel argues it needs a high return on equity to attract investors for new infrastructure projects.
“A competitive return on equity helps attract the investment needed to build and maintain critical infrastructure at the lowest, reasonable cost,” Xcel Energy said in a statement. “The commission’s decision supports a competitive return on investment, which is below the national average, and keeps bill increases at or below the rate of inflation.”
But Levenson-Falk said the company never showed it was struggling to attract investors at its previous return on equity rate, and noted the company has been posting high revenues in recent years.
The Department of Commerce, which also advocates for Minnesota consumers before the PUC, was critical of the decision and warned in a letter that it could bring price increases to ratepayers statewide.
“Other utilities coming before the Commission will likely expect the same increase to their authorized return on equity and reductions on their risk,” Katherine Arnold, an assistant attorney general who represents the Commerce Department, wrote. “If similar actions are taken in future cases, the result will be additional inflation of customers’ energy bills throughout the state to pay for the higher profit margins and shifted financial risks.”
Public participation high
The PUC isn’t the highest profile government agency, but its actions impact all Minnesotans. Watchdogs like Chan and Levenson-Falk said they’ve seen a major increase in public comments and participation in recent rate cases.
This rate case saw more than 8,500 comments filed online. Most were from people who opposed the rate increases, and many specifically mentioned return on equity, Chan said.
“People are participating,” he said.
The question remains whether that participation is impacting decisions that commissioners are making, he said. Chan believes that utility regulation is social policy, and that there’s a way to go to make it easier for the public to participate in setting that policy and to feel heard.
“When commissioners are acting really well it’s when they are creating a social policy vision and enacting it,” Chan said. “It’s hard, the commission is under an incredible amount of competing pressures.”
How to comment
You can comment on the rate case by emailing consumer.puc@state.mn.us and including Docket #24-320 in the subject line. You can also use the PUC’s online comment form.
