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Dale Wetzel, Associated Press
Tony Clark, right, the chairman of the North Dakota Public Service Commission, speaks on Wednesday, Feb. 29, 2012, during commission discussion of an Xcel Energy electric rate increase at a commission meeting in the agency's hearing room on the 12th floor of the North Dakota state Capitol in Bismarck, N.D. Listening on the left is Commissioner Kevin Cramer. Xcel Energy provides electricity to Fargo, West Fargo, Grand Forks, Minot and some smaller North Dakota communities.

BISMARCK, N.D. — Xcel Energy will trim an earlier increase in its North Dakota customers' power bills and spend more to prevent Fargo electricity outages as part of a $15.7 million electric rate increase that the state Public Service Commission approved Wednesday.

The agreement, which the three-member commission unanimously endorsed, is less than the $24 million Xcel wanted when it filed its first rate request in December 2010.

The accord will lower the electric charges that Xcel's customers have been paying for the last year, Commissioner Brian Kalk said.

That is because Xcel has been collecting most of the rate increase it asked for since February 2011. Xcel used a state law that allows utilities to impose higher rates while they await the Public Service Commission's regulatory review, which lasts several months.

When Xcel's higher rates took effect a year ago, they raised the monthly bill for a typical residential customer by about $8 monthly, Kalk said. The rate agreement that Xcel accepted Wednesday will pare back the monthly increase from $8 to $6.56.

The cost estimates assume average residential electric usage of 821 kilowatt-hours of power monthly, said Tony Clark, the commission's chairman.

Because Xcel Energy was charging higher rates for almost a year, the utility must refund about $7.2 million to ratepayers. Kalk said Xcel will provide a credit on electric bills this summer that will total about $37 for a typical residential customer.

Xcel Energy serves more than 80,000 electric customers in Fargo, West Fargo, Grand Forks, Minot and a number of smaller communities.

The agreement will raise residential customers' electric rates by 8.7 percent, while increasing the charges for commercial businesses between 7.4 and 10.6 percent, regulatory filings say.

Clark, Kalk and Commissioner Kevin Cramer said the agreement included provisions aimed at reducing electric service problems in Fargo.

The city experienced three major outages last year, two of which were caused by Xcel equipment failures. The third was brought on by a Memorial Day storm with strong winds that knocked out power to 39,000 customers in Fargo and the surrounding area.

In February 2011, an electrical substation failure caused 16,000 customers in Fargo and West Fargo to lose power, which was not restored for about 12 hours, the company said in a statement Wednesday.

In November 2011, an equipment testing error caused an outage affecting about 48,000 customers, all of whom had their power restored within a half-hour.

Xcel, as part of the rate settlement, intends to install $2.5 million worth of sophisticated electric switches in Fargo. The technology will be able to isolate power outages and make sure they do not affect broader service areas, said David Sederquist, an Xcel senior regulatory consultant.

The new switches will "dramatically reduce the duration of high-profile ... outages," Sederquist said. "That will be felt, obviously."

Xcel has also agreed to hire a new tree-trimming crew to keep branches from damaging power lines, replace some aging underground cables, and put an electrical engineer in Fargo to monitor the company's North Dakota service network.

"For me, the key to this settlement really was dealing head-on with these reliability issues that we've had in the Xcel system," Clark said.

Kalk and Cramer said the order may force Xcel to pay more attention to its North Dakota operations, which they said were a small part of the company's utility service network. Xcel has 3.4 million electric customers and 1.9 million natural gas customers, and has utility operations in eight states.

"When you're dealing with such a small universe, like North Dakota is, in a larger context, like Xcel Energy is, I think we sometimes feel a little bit like the tail is wagging the dog," Cramer said.