The Colorado Public Utilities Commission (PUC) approved a settlement increasing Xcel Energy's annual natural gas base rate revenue by $32.2 million, but it also is requiring the company to absorb some revenue loss due to declining customer usage.

The PUC approved most of the provisions of an agreement hammered out by Xcel, PUC staff and the Office of Consumer Counsel. The agreement reduces the companys authorized rate of return on equity from 10.5% to 10.25%. And the PUC modified a provision of the settlement that allows Xcel to institute an adjustment to recover distribution costs associated with declining customer usage. The mechanism is known in the industry as revenue decoupling (see Daily GPI, June 14, 2006).

The company's three-year decoupling pilot program would adjust revenue received from residential customers from year to year to compensate the utility for reductions in gas use that occur because of energy efficiency or conservation measures. The PUC ruled that Xcel must absorb the cost of the first 1.3% of the sales reduction each year but would be allowed to recover reductions above that threshold. Over the last five years, usage per Xcel customer has declined about 2.6 per year.

Under settlement terms, rates for the average residential customer would increase by about 2.56%, or $1.61/month, based on usage of 65 therms. Commercial customers would see an overall monthly bill increase of about $5.48 based on usage of 329 therms. The new rates are expected to take effect July 30.

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