Xcel's bid to freeze Minnesota rates sets up a January decision and a fallback 2027 rate case

Xcel Energy has given Minnesota regulators a choice to make by January: approve a two-year freeze on base rates paid for with accelerated tax credits, or expect a full electric rate case early in 2027.

Northern States Power Co.-Minnesota, Xcel's largest utility, asked the Minnesota Public Utilities Commission on Oct. 9 to hold customer base rates flat for 2027 and 2028, according to a Form 8-K filed the same day. The company calls the proposal an Electric Customer Rate Stability Plan and offered it in place of the rate case it had been preparing.

The mechanics matter for investors. Instead of raising rates to recover ongoing capital spending, the utility would accelerate recognition of federal investment tax credit benefits tied to five battery storage projects over two years, using them to offset the added revenue requirement. Existing true-up and tracker mechanisms from the most recent rate case would stay in place, so some cost recovery continues outside base rates.

The trade-off is timing. Pulling tax credit benefits forward helps customers now and spares the company a contested case, but it uses up a source of offsets that would otherwise have been spread out over time. Xcel has asked for a ruling by January 2027 and said it expects to file an electric rate case early that year if the plan is rejected.

Xcel also moved to trim its footprint the same week. On Oct. 6 it agreed to sell its Michigan operations in the Upper Peninsula, moving about 6,000 natural gas customers to SEMCO Energy Gas Co. and about 9,000 electric customers in Gogebic and Ontonagon counties to Upper Peninsula Power Co. The sale needs state and federal approvals and is expected to close in 2027, and the companies said customers do not need to take any action now.

"Xcel Energy continues to invest heavily in Wisconsin and across its other territories, so this transaction will ensure the customers of the Upper Peninsula will also benefit from focused investments by SEMCO and UPPCO," said Karl Hoesly, president of Xcel Energy-Wisconsin and Michigan.

Read together, the two moves suggest a company trying to hold bills steady in its core markets while it keeps spending heavily on its system. Xcel reports third-quarter results on Oct. 29, when analysts are likely to press for how the freeze would affect earned returns in Minnesota and for an update on capital plans.