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Xcel proposes gas rate boost

Xcel Energy natural gas customers in Fargo and Grand Forks would see their bills climb an average of $2.91 a month to pay for delivery of the heating fuel under a proposed settlement with regulators.

Xcel Energy natural gas customers in Fargo and Grand Forks would see their bills climb an average of $2.91 a month to pay for delivery of the heating fuel under a proposed settlement with regulators.

The increase in the base rate - the amount natural gas customers pay for distribution, including pipeline maintenance - would allow Xcel to boost its slumping earnings on natural gas.

The good news for consumers if the North Dakota Public Service Commission accepts the rate settlement offer: Xcel natural gas base rates would be frozen until Jan. 1, 2010.

But the settlement does not apply to the cost of the natural gas - those fluctuations are passed along directly to customers. Xcel's profits come only from returns on its natural gas distribution system.

Xcel's return on equity has consistently fallen below its allowed level in recent years - an average of 6.5 percent over the past decade - compared to the 11.5 percent authorized level.

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Also, Xcel received a rate decrease in 1996 - the year before the devastating Red River Valley flood, which required the utility to rebuild 23 miles of gas main and reconnect service to 1,560 customers.

Customers would be protected if Xcel's returns jump, however. Customers would share half of any actual earnings above 10.75 percent, and three-fourths of earnings above 11.25 percent, under the proposed settlement.

"We're trying to establish here a system that would protect the consumer," David Sederquist, a senior regulatory consultant for Xcel, said Monday. "We're not interested in having rates be too high, either. We're trying to establish a middle ground."

Under Xcel's proposal, natural gas delivery charges would increase by 18.5 percent, but because distribution costs are a small part of the total bill, overall natural gas rates will increase 3.6 percent for the average residential user, Sederquist said.

In current form, Xcel's requested rate increase is $506,353 less than the $2.8 million initially requested.

Kevin Cramer, the public service commissioner who oversees natural gas, said the Xcel proposal with its profit-sharing for consumers for "excess" returns is an intriguing approach.

The Public Service Commission has scheduled an informal hearing to air the proposed settlement at 11 a.m. May 11.

Readers can reach Forum reporter Patrick Springer at (701) 241-5522

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