BISMARCK, N.D. — Xcel Energy has agreed to cut its requested electricity rate increase for North Dakota customers roughly in half under a proposed settlement, easing—but not eliminating—the hit to household and business power bills in 2025.
Under the agreement, overall electric rates would rise by 10.37%, with residential customers facing a 12.92% increase. That’s down from the utility’s original request for a 19.34% overall hike and a residential increase of more than 24%. [1]
The deal still needs approval from the North Dakota Public Service Commission (PSC), which could vote on the case as early as January.
What changed in Xcel’s North Dakota rate case?
The rate case centers on Northern States Power Co., Xcel’s Minnesota-based subsidiary that serves about 97,000 electric customers in cities including Fargo, Grand Forks, Minot and West Fargo. [2]
According to filings and reporting from the North Dakota Monitor and local broadcast partners:
- Xcel initially sought permission from the PSC to raise its North Dakota electric revenues by about $44.56 million, a 19.34% net increase. [3]
- Under the November 18 settlement agreement, the company and PSC advocacy staff agreed instead on a smaller net revenue increase of $23.86 million, tied to a test‑year revenue requirement of $254.01 million for 2025. [4]
- Overall, that translates into the 10.37% across‑the‑board increase and 12.92% for residential customers that are now being reported by outlets including KFYR‑TV, KFGO radio and KNOX Radio, all republishing the Monitor’s story. [5]
The settlement was negotiated among Xcel, PSC advocacy staff and Walmart Inc., which intervened in the case as a large power user. [6]
How much more might a typical customer pay?
Regulators previously estimated that if the PSC had granted Xcel’s original 19.34% request in full, the average residential customer would have paid about $22.34 more per month compared with last year’s bills. [7]
Using that same baseline, a 12.92% residential increase under the settlement would equate to roughly two‑thirds of that impact—on the order of $14–$15 extra per month for a typical household, though the exact figure will depend on individual usage and final rate design.
Importantly, North Dakotans are already paying higher interim rates while the case is pending. PSC utilities director Victor Schock has said that if the settlement is approved as filed, customers’ bills should not change dramatically from what they’re paying under the interim increase. [8]
What’s inside the settlement: revenue, returns and risk‑sharing
Regulators don’t just sign off on a percentage increase; they sign off on the math behind it.
According to PSC documents and company testimony, the proposed settlement would: [9]
- Set Xcel’s North Dakota electric revenue requirement at $254.01 million for the 2025 test year, reflecting a $23.86 million net increase.
- Use a capital structure of 52.5% equity and 47.5% debt, close to what the company proposed.
- Allow a 9.8% return on equity (ROE) for shareholders, within the typical range for regulated utilities.
- Produce a weighted average cost of capital of 7.3%—a key number regulators use to judge whether customers are paying a fair price for the infrastructure serving them.
The settlement also adds a significant consumer protection: an earnings‑sharing mechanism.
If, after weather‑normalizing and other adjustments, Xcel’s North Dakota electric operations earn more than a 10.1% return on equity, the company must refund 70% of those excess earnings to customers. The mechanism would apply from 2025 onward until the next rate case or a future PSC order changes it. [10]
That kind of sharing arrangement is designed to give the utility a chance to earn a fair profit while ensuring customers benefit if earnings climb well above the regulatory target.
Why Xcel says it needs higher rates
Xcel’s last North Dakota electric rate increase came four years ago. Company representatives told regulators that rising costs since then—especially inflation and major grid investments—made a new rate case unavoidable. [11]
According to testimony and reporting:
- The company highlighted spending on a new Grand Forks service center, a new substation and equipment upgrades across its system. [12]
- Xcel argues that, even with the increase, North Dakota electric bills remain below the national average, pointing to historically low rates in the region. [13]
At the same time, Xcel is in the middle of a long‑term transition away from coal in neighboring Minnesota. The company has already retired one unit at its Sherburne County (Sherco) coal plant and plans to retire the remaining units in 2026 and 2030 while replacing them with what it bills as one of the Midwest’s largest solar and battery projects. [14]
North Dakota regulators have worried that early coal retirements driven by Minnesota policy could push additional costs onto North Dakota customers. [15]
Coal retirements and the “coal adder” compromise
The settlement attempts to blend North Dakota’s preference for keeping coal plants running longer with Xcel’s broader clean‑energy strategy.
In supplemental testimony, Xcel’s revenue analysis director Benjamin Halama describes a two‑part compromise on the company’s coal fleet: [16]
- Lower costs via longer depreciation lives
- For ratemaking, the parties agreed to keep North Dakota’s existing, longer depreciation schedules for Sherco Units 1–3 and the Allen S. King plant.
- That adjustment reduces the 2025 revenue requirement by about $8.47 million, reflecting the notion that, from North Dakota’s point of view, those units should be treated as if they will run longer.
- A new “coal adder” that raises revenue by $5 million
- To acknowledge that Xcel is actually retiring those units earlier than North Dakota’s preferred timeline, the parties added a “coal adder”—an additional $5 million to the revenue requirement.
- The adder is meant to approximate costs Xcel could have incurred if it had kept the coal plants online longer.
Net result: the coal‑related adjustments still lower the test‑year revenue requirement overall, but less than they would have without the adder, reflecting a middle ground between the utility’s transition plans and North Dakota policymakers’ concerns.
Four big issues raised at the PSC hearing
During a public hearing on the settlement, Public Service Commissioner Sheri Haugen‑Hoffart said she saw four recurring themes in the 165 public comments the PSC received. She asked Xcel witness Allen Krug, the company’s vice president of state regulatory policy, to address each one. [17]
1. Data centers
Some commenters worried that new energy‑hungry data centers would drive up everyone’s power bills. Krug told regulators that the North Dakota rate case is not driven by data center projects, and that Xcel aims to ensure existing customers don’t subsidize those large new loads. [18]
2. Seniors and customers on fixed incomes
Haugen‑Hoffart highlighted concerns from seniors and others living on fixed incomes, who may see electricity bills rise faster than their Social Security cost‑of‑living adjustments. Krug acknowledged that “no cost increase is without pain” but argued that the proposed hike is still below the cumulative rate of inflation since the last rate case. [19]
3. Minnesota climate policy and coal closures
Commenters questioned whether Minnesota’s push toward renewables—combined with Xcel’s coal plant retirements—was being “exported” onto North Dakota bills. Earlier coverage of the case noted that PSC staff view the Sherco coal facility as an asset that, in North Dakota’s view, should keep running rather than be retired early at additional cost to customers. [20]
Krug countered that the rate increases are not primarily driven by policy differences between the two states, pointing instead to reliability‑related investments and inflation. [21]
4. Xcel’s profits
Finally, some customers questioned whether Xcel’s shareholders are earning too much. Krug testified that the company’s profits are in line with what investors typically require to finance utility infrastructure. The settlement’s 9.8% allowed ROE and the earnings‑sharing mechanism are meant to formalize that balance between investor returns and customer protections. [22]
How this fits into Xcel’s wider transition
Across its eight‑state footprint, Xcel has pledged to deliver 100% carbon‑free electricity by 2050 and has already surpassed 50% carbon‑free generation as of 2023, driven heavily by wind and nuclear power. [23]
That broader shift is playing out differently in each state:
- In Minnesota, Xcel is pursuing steep electric rate increases to support clean‑energy and grid projects, including planned hikes that could raise the average residential bill by about $13 per month by 2026 if regulators approve. [24]
- In South Dakota, the company is separately seeking a roughly 19% electric rate increase, which regulators say would add about $21 per month to the average residential bill. [25]
North Dakota’s settlement—cutting the requested increase roughly in half while embedding coal and earnings‑sharing compromises—illustrates how state regulators can steer the pace and price of the energy transition.
What happens next for North Dakota customers?
The settlement is not yet final. Here’s what to watch:
- PSC decision
The three‑member North Dakota PSC could vote on the settlement in January, after reviewing testimony and public comment. The commission can approve, modify or reject the agreement. [26] - Timing and interim rates
Customers are already paying an interim increase while the case is pending. If final approved rates differ from interim rates, regulators could order refunds or additional charges to true up the difference, depending on the outcome—though the settlement aims to narrow that gap. - Future rate cases
The earnings‑sharing mechanism is designed to stay in place until Xcel files its next North Dakota electric rate case, meaning customers could see credits in years when the utility significantly over‑earns. [27]
What Xcel customers can do now
While the regulatory process plays out, North Dakotans still have options to blunt the impact of higher power costs:
- Track PSC updates – The full case record for Case No. PU‑24‑376 is available on the PSC’s website, including notices of future public meetings and any final order. [28]
- Watch your usage – Because the increase is percentage‑based, households with higher usage will feel a bigger impact. Simple steps like upgrading to LED lighting, sealing air leaks, and tuning up heating systems can help reduce monthly bills.
- Ask about assistance programs – Low‑income households and seniors may qualify for bill assistance or weatherization programs through state agencies, utilities or local nonprofits.
- Plan for 2025 budgets – Businesses and institutions—especially large power users such as schools, farms and manufacturers—may want to factor the higher rates into their 2025 operating budgets.
Even at a reduced level, the settlement keeps double‑digit rate increases on the table for Xcel’s North Dakota customers. For many, the news that the hike has been cut in half will come as a relief—but the underlying debate over who pays for the energy transition, and how much, is likely to continue well beyond this rate case.
References
1. northdakotamonitor.com, 2. northdakotamonitor.com, 3. www.psc.nd.gov, 4. www.psc.nd.gov, 5. www.kfyrtv.com, 6. www.psc.nd.gov, 7. northdakotamonitor.com, 8. northdakotamonitor.com, 9. www.psc.nd.gov, 10. www.psc.nd.gov, 11. northdakotamonitor.com, 12. northdakotamonitor.com, 13. northdakotamonitor.com, 14. northdakotamonitor.com, 15. northdakotamonitor.com, 16. www.psc.nd.gov, 17. northdakotamonitor.com, 18. northdakotamonitor.com, 19. northdakotamonitor.com, 20. northdakotamonitor.com, 21. northdakotamonitor.com, 22. northdakotamonitor.com, 23. en.wikipedia.org, 24. www.axios.com, 25. southdakotasearchlight.com, 26. northdakotamonitor.com, 27. www.psc.nd.gov, 28. www.psc.nd.gov
