NORTH DAKOTA ELECTRIC RATE CASE

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In North Dakota, Xcel Energy serves more than 88,000 homes and businesses. ... average annual basis by about 1.8 percent from 1992 to 2009. This compares ...
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North Dakota Electric Rate Case

North Dakota Electric Rate Case

What has Xcel Energy done to control costs? • We operate large, economical baseload coal and nuclear power plants. In addition, our diverse resource mix also includes natural gas, wind, hydro, biomass, and other resources, which together provide flexibility and help minimize supply risk. • As a large, integrated company, we are able to negotiate purchasing contracts that benefit our customers. For example in 2010, we negotiated a cost-saving supply contract with Border States Electric in Fargo to provide electric and natural gas materials across our eight-state service area. • We use new technologies such as automated meter reading and mobile data terminals to work more productively and safely. • We are working to minimize medical cost increases by implementing employee wellness programs, changing benefits, and increasing the amount employees contribute toward their health plans. • We have taken steps to reduce our travel and employee expenses by implementing new cost limitations.

What is Xcel Energy doing to help customers manage energy costs? We offer rate saving programs for customers who use a significant amount of energy during off-peak times and Saver’s Switch® – a program that provides discounts for allowing us to control air conditioning units. We administer energy efficiency programs such as lighting rebates for businesses. We provide extensive information on-line, at community events and in discussions with customers to help them become more energy efficient. Recently, we made available our Online Account Management tool, which allows customers to view their energy consumption, billing and payment history; update account information; subscribe to programs and access energy savings tips.

When will a final decision be made on this case? The rate case process, from start to finish, generally takes from 7-12 months. We anticipate the commission will hold public input sessions during the spring. We also expect formal technical hearings to be held in late summer and a final decision on the request to be issued by late fall.

Every time you flip a light switch or operate electrical equipment, we know you’re counting on us. It takes a lot of power plants, poles, wires and people to deliver the electricity you rely on, 24 hours a day, every day. In North Dakota, Xcel Energy serves more than 88,000 homes and businesses. When our costs rise, we need to adjust our prices to keep serving your needs in the way you have come to expect – safely, reliably and in an environmentally responsible way. However, because we are a regulated utility, we must first approach our regulators to request an increase in rates, in the form of a “rate case” to ensure that the rates customers pay are appropriate.

What is a rate case? Just like any business, we must cover our costs of doing business. For a utility, those costs include providing energy to homes and businesses, meeting increasing regulations and making investments to our infrastructure. We file rate cases when those costs rise. In North Dakota, we file a rate case with the North Dakota Public Service Commission.

How much of an increase are you requesting? In our December filing, we are seeking a 12 percent revenue increase for 2011. The request also seeks a second-year increase of approximately 2.6 percent in 2012 to recover system investment costs that will begin to accrue that year. This is our first rate application in three years, and only the second application since 1992.

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North Dakota Electric Rate Case

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Why is Xcel Energy seeking an increase in electric rates?

Why are you proposing rate increases for both 2011 and 2012?

How do our electricity prices compare to those of other utilities?

How have electricity costs fared compared to other products and services?

About three-fourths of our increased costs are due to infrastructure investments such as:

Some large capital projects described earlier are multi-year projects that will not be fully in service during 2011. Therefore, our request for 2012 includes the remaining portion of the costs primarily associated with these projects. A two-year approach will address these known system costs while avoiding the significant expense of another regulatory proceeding.

As shown in the chart below, the average electric rates our North Dakota business customers pay are among the lowest in the region and nation.

Overall, electric price increases have been less over the past 25 years than nearly all other key products and services, based on data from the U.S. Bureau of Labor Statistics and the U.S. Energy Information Administration:

• Maintaining, replacing and improving our generating plants. While our plants have served customers reliably and economically for decades, we are in the midst of a significant multi-year investment program to refurbish, repower, and expand the output of our plants while complying with federal environmental regulations. Our analysis shows it is significantly more economical to use existing plants, sites and transmission lines rather than construct new facilities at new locations. • Extending the operating lives of our two nuclear plants and increasing their total capacity by 235 megawatts. • Adding 350 megawatts of Xcel Energy-owned wind generation, which includes a 150-megawatt project in North Dakota. • Investing in our transmission and distribution system – the poles and wires that are necessary to upgrade to maintain system reliability and support. Other key cost drivers include economic and regulatory compliance trends. We face increasing expenses related to employee pension and healthcare costs. We are also seeing new and increasing regulatory requirements, primarily federal requirements, from entities such as the North American Electric Reliability Corporation, Nuclear Regulatory Commission and Environmental Protection Agency. While our compliance costs are prudently managed, increased costs associated with compliance is unavoidable. This includes new costs associated with additional safety and security requirements at our nuclear facilities.

When will a rate increase be effective? While the North Dakota Public Service Commission considers the request, state law allows Xcel Energy to collect a portion of the requested increase on an interim basis. We have requested an interim increase of 10.6 percent to go into effect in February 2011. If the commission approves final rates that are lower than the interim level, we will refund the difference plus interest.

Average commercial electric rates 2009

6.81¢

ND

6.84¢

Xcel Energy

7.14¢

10.26¢ 7.92¢

SD

MN

8.32¢

MT

U.S.

Apparel

22%

Electricity

49%

Transportation

94%

Housing

116%

Food

121%

Gasoline

140%

Health Care

315%

Education (tuition)

484%

Source: U.S. Energy Information Administration website, Rpt 861.

How do Xcel Energy’s electric price increases compare to the rate of inflation? We recognize that any increase in rates affects our customers. A look at our electric rates in comparison to the rate of inflation shows that customers have benefitted from our commitment to carefully manage our costs. Our North Dakota average electric rates have increased on an average annual basis by about 1.8 percent from 1992 to 2009. This compares to a Consumer Price Index average increase of about 2.2 percent per year for the same period. Even when we add the estimated impacts of our rate request, we still remain below the overall rate of inflation, as shown in the chart below. Xcel Energy rates remain below inflation with proposed increase 70.0% 60.0% 50.0% 40.0%

tion

Infla

30.0%

ect e El

s

ate

ric R

20.0%

g

ra Ave

10.0% 0.0% -10.0%

‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Average rate information includes fuel costs.

Forecast