BISMARCK — State regulatory staff and outside stakeholders reached an agreement earlier this month with Fargo’s largest power provider for a hike on customers' electricity bills to cover $7.1 million in company costs and investments.

The settlement with Minneapolis-based Xcel Energy is a significant cut from what from the $19.2 million that the company originally requested in an application to the North Dakota Public Service Commission last November.

The agreement, which was reached between commission staff, intervenors and Xcel was presented to North Dakota’s three-member Public Service Commission in a hearing on Thursday, July 23, and still requires the commission’s approval. The elevated payments from North Dakota customers would go toward covering previous company costs, like system maintenance, investments in its nuclear fleet and other expenses.

If granted, Xcel's 95,000 North Dakota customers would see a 3.4% increase in the cost of their monthly electric bills, or about $2.50 per household — down from the company's initial request to hike residential rates by more than 10%.

Among the largest investments not included in the settlement agreement was $2.7 million for the early retirement of two units of a large coal-fired power plant outside Minneapolis, a measure that Commission Chair Julie Fedorchak said was a sticking point for state regulators.

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Xcel Energy has set aggressive goals for transitioning from fossil fuels to renewable energy sources like wind power. That movement has raised concerns for North Dakota’s three Republican Public Service Commissioners, who have argued that moving away from around-the-clock resources like coal risks destabilizing the power grid and leaving households vulnerable to blackouts.

"Xcel Energy believes the settlement represents a productive outcome for both our customers and the company," spokeswoman Julie Borgan said in a statement. Borgan added that the lower settlement outcome has no effect on Xcel's plans to retire the two units of its Minnesota coal plant.

Under state law, utility providers must receive approval from the Public Service Commission before increasing their rates.

The North Dakota chapter of the AARP, one of the case intervenors, opposed Xcel’s original rate increase application but agreed to the lesser change outlined in the new settlement.

Though Josh Askvig, North Dakota director for the AARP, said his organization would have preferred no rate increase at all, he added that they were pleased with the compromise reached between the two sides. He noted that the costs to North Dakota households was substantially reduced by eliminating several investments Xcel was looking to cover related to Minnesota renewable energy policies, like the planned coal plant retirement and state requirements around wind and solar generation.

“Minnesota policy, that's all good and fine,” he said. “But North Dakota ratepayers shouldn't be paying the cost for Minnesota decisions.”

Because the commission granted Xcel an interim rate increase higher than the settlement, North Dakota customers would also see a refund on their previous bills. Commissioner Brian Kroshus estimated that payback between $25 and $30 a household.

Separately, Xcel subsidiary Northern States Power requested approval from the PSC earlier this year for around $33 million in cost recovery related to the nationwide natural gas price spike during February’s extreme cold snap. After a special investigation into the Xcel subsidiary’s recovery plan, which significantly exceeded those of other natural gas providers in North Dakota, commissioners approved the costs at the end of June.

That will result in an extra charge of around $240 per household for Northern States Power customers, mostly in the Fargo and Grand Forks areas, which is being applied over more than a year.

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