The Financial Analysis unit provides technical advice and support for the Minnesota Public Utilities Commission (Commission) in making decisions on whether to approve requests for changes in electric and natural gas rates. Along with the other units in the Regulatory Analysis Division, the Financial Analysis unit examines and evaluates electric and gas utility cases that come before the Commission to help ensure the changes in rates that are approved are fair and reasonable for utility customers while also allowing the utility the opportunity to recover reasonable costs and earn a reasonable return on its investments.
Requests for changes in rates are made in the following types of cases:
Under Minnesota law, Minn. Stat. section 216B.16, a regulated utility may propose to change rates for service at any time. These filings must clearly define the effects and justification for the proposed change. There are two major decision elements in a rate case. The revenue requirement – how much of a revenue change is warranted? And rate design – how should the requirement be split among rate classes? The Financial Analysis unit examines and evaluates many components of the proposed revenue requirement – such as the cost of labor, utility operating and maintenance expenses, and the cost of capital. The proposed utility rate designs are evaluated for how well they align with costs and to ensure all similarly situated customers are subject to the same rates, terms, and conditions of service.
The Commission has established rate mechanisms that allow the regulated electric and natural gas utilities to adjust their rates (increase or decrease) to reflect changes in the actual cost of wholesale energy. Electric utilities do this with an annual fuel clause adjustment (FCA) that includes purchased power costs, while natural gas utilities file monthly purchased gas adjustments (PGAs), annual requests for change in interstate pipeline demand entitlements, and annual fuel cost true-ups. These adjustments are designed to ensure customers pay only actual fuel and purchased power costs and wholesale natural gas costs, with no mark-up or profit for the utility service provider.
The Commission is also required by Minnesota law to allow utilities to adjust their rates annually using rate rider for various categories of statutorily defined expenses. Some of the more significant of these rate riders are for recovery of costs for the construction of new electric transmission lines, gas utility infrastructure costs, and for meeting Minnesota’s renewable energy standards.
The Financial Analysis Unit also is responsible for various other categories of filings that come before the Commission including:
Issuance of Securities
Approval of Affiliated Interest Agreements
Small Gas Utility Franchise Exemptions
Miscellaneous Other Riders