Proposed rate increase partly result of clean energy commitment

Following a $1.7 billion investment over the past two plus years in the regional electricity grid, Xcel Energy announced last weekend that it will seek a rate increase for 2020 to offset its sizable outlay. These investments are explained in a rate review laying out the reasoning behind seeking an overall 6.5 percent increase in annual revenues.

The company must navigate its way through a handful of regulatory hoops in the coming months. The proposal must be reviewed by the Public Utility Commission of Texas, the 80 state municipalities served by the company and groups representing the interests of various classes of customers before rate changes can be made.

“We’ve made significant investments in system reliability and new generation facilities that deliver clean, affordable energy,” David Hudson, president of Xcel Energy – Texas, said in our story. “These investments build in long-term savings that will keep increases close to the rate of inflation over the long term.”

In the near term, customers’ energy bills have fallen as a result of what has been termed historically low costs for natural gas and a significant increase in the amount of affordable wind energy. Those factors have contributed to a 5 percent reduction in residential bills over the past month.

As our story pointed out, if the proposed rate increases become effective, residential customers using 1,000 kilowatt-hours per month could see an increase of almost $15 per month (13.9 percent). However, when compared with prices from late 2018, a period of higher fuel costs, the proposed increase is 9 percent. Take other customer classes, such as commercial and industrial, into account, and the new rates would be less than 1 percent more than overall rates from 2017.

Customers across the state are expected to continue benefiting from low fuel costs because more wind energy resources are being brought on line. According to Xcel, it added enough new wind energy in June to power 184,000 typical homes with the completion of the 478-megawatt Hale Wind Project that is located near Plainview. That projects accounts for some 41 percent of $1.7 billion outlay of Xcel, the company said, adding the fuel cost savings are offsetting the amount of new revenue required to recover the company’s investment.

According to Xcel, the chief reason behind the rate increase is its investment in new transmission lines and substations across the system making the grid not only more reliable but also ramping up its capacity for moving large amounts of electricity. Likewise, there has been a significant investment in upgrades to local distribution systems in an effort to relieve stress on substations across the Panhandle.

“Investing in clean energy and improving the regional grid is much like purchasing fuel-efficient cars or a new energy-efficient air conditioner at home,” Hudson said in our story. “These investments will result in considerable gains from energy savings over time. This will help us stabilize rates by keeping future price increases within the range of inflation even as we significantly boost the capabilities of our system to meet the needs of a growing economy.”

A reliable power grid is something everyone takes for granted until its off line, and it requires an investment to keep up with the demands of a growing region. Equally important is a commitment to clean energy, which is enjoying a growing presence in West Texas. No one enjoys seeing their bills increase, but Xcel appears to have a compelling case to present to regulatory authorities and customers alike.