A comprehensive settlement agreement Xcel Energy has reached with Colorado state regulators and consumer advocates will mean higher electricity rates, lower natural gas rates and a reduced rate of return for the utility company. Although there will be a $230,000 decrease in electricity base rates, the drop will be more than offset by a $93.1 million increase in power supply costs, which are passed through to customers.

Typical residential electric customers will see an increase of $3.32 on their monthly bills, while typical small business electricity customers will see an increase of $6.74 per month.

However, customers will see a decrease in natural gas rates. The settlement calls for $33.3 million cut in natural gas base rates. And steam base rates will decrease $26,000. Typical residential customers will see a decrease of $1.74 on monthly natural gas bills, while typical small business natural gas customers will see a decrease of $5.55 a month. Typical residential customers receiving both natural gas and electricity from Xcel Energy will therefore experience a net increase of $1.58 on their monthly utility bills; typical small business with combined services will have a monthly increase of just $1.19.

“The outcome of this case has many intertwined parts,” said Fred Stoffel, vice president of regulatory policy. “On the electricity side, the final result is that our base utility rates are essentially going to remain flat. However, because of increases in the cost of the fuel used to generate power and increases in the cost to purchase electricity, there will be an increase in the fuel component of our rates. On the natural gas side, there will be an annual decrease in base utility rates.”

The major aspects of the settlement include a reduction to the profit component of the rates, lower depreciation rates, and an increase in costs assigned to non-regulated products and services. The authorized rate of return on equity for the electricity business would decrease from 11% to 10.75%. The authorized rate of return on equity for the natural gas business would decrease from 11.25% to 11%.

The settlement also would provide Xcel the ability to continue its electricity trading operations and for the sharing of trading profits between customers and the company. Xcel’s customers are protected from paying the costs of energy trading losses. The settlement also provides for the commission to conduct a proceeding in 2004 to determine whether energy trading should continued in its present form.

The company is asking the commission to authorize the settlement base rates to become effective on July 1. The settlement agreement is subject to California Public Utility Commission approval.

The settlement is a culmination of discussions with the staff of the Colorado Public Utilities Commission, the Office of Consumer Counsel, certain large customers, the City and County of Denver, the Land and Water Fund, the Governor’s Office of Energy Management and Conservation, the Colorado Energy Assistance Foundation, the Federal Executive Agencies and the Colorado Business Alliance for Cooperative Utility Practices.

Minneapolis-based Xcel has regulated operations in 12 western and midwestern states. Formed by the merger of Denver-based New Century Energies and Minneapolis-based Northern States Power Co., Xcel Energy provides a comprehensive portfolio of energy-related products and services to 3.2 million electricity customers and 1.7 million natural gas customers through its regulated operating companies. In terms of customers, it is the fourth-largest combination natural gas and electricity company in the nation.

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