Minnesota regulators on Thursday approved temporary rate increases topping 8% for Xcel Energy's natural gas service and Minnesota Power's electric system that will lead to higher bills for utility customers starting in January.

In November, both utilities asked for larger rate increases, but the state Public Utilities Commission (PUC) typically grants interim rates while scrutinizing that overall request. Customers get a refund if the PUC approves final rates that are lower than temporary ones.

As the cases are reviewed, Duluth-based Minnesota Power asked for an 8.6% temporary increase while Xcel wanted an 8.5% interim hike.

Minnesota Power said it would result in an extra $8 a month on electric bills for the average residential customer, and Xcel said it would be a $6.06 monthly increase for gas customers.

"This rate request is essential for Minnesota Power's ability to make the best investments, including in our workforce, to achieve these carbon-free goals while maintaining safe, reliable and affordable energy for our customers," said Jennifer Cady, vice president of regulatory and legislative affairs for Minnesota Power.

Xcel spokesman Theo Keith said its rate hike "will support investments in gas transmission and distribution infrastructure, safety systems at our gas peaking plants, IT systems and fleet and service center projects."

Xcel's full request is for a rate increase in 2024 of $59 million, roughly a 9.6% jump. The utility, the second-largest gas provider in Minnesota with 477,000 customers, said that big of a hike would result in a typical residential natural gas customer paying an extra $6.93 a month.

Minnesota Power, meanwhile, is aiming for a 12% rate increase worth $89.1 million. The utility, which serves 150,000 customers across northeastern Minnesota, says the cash would in part help pay for recruiting and retaining its workforce amid a transition from fossil fuels.

The PUC did not side with state Attorney General Keith Ellison's office, which asked the commission to cap the interim rate increases for residential customers of both utilities to 60% of what Xcel asked for and 50% of what Minnesota Power wanted.

The AG's office argued that Minnesotans are still recovering from high inflation on basic costs like food, housing and energy and are facing other economic hardship. And in Xcel's case, the AG's office said customers behind on their energy bills owe an average of $512, up from $485 a year ago.

"In contrast to the company's strong financial position, many of its residential ratepayers are struggling to recover from multiple years of high inflation and the impacts of the COVID-19 pandemic," says a letter to the PUC written by Assistant Attorney General Peter Scholtz.

A letter from Assistant Attorney General Travis Murray in the Minnesota Power case cited hunger, affordable housing problems, childcare costs and other issues facing people in northeastern Minnesota and said the utility is "financially sound."

A coalition of the utility's large power customers — including paper companies and taconite mines — argued the PUC shouldn't limit any increases to just residential customers if economic conditions are so bad.

This is the second gas rate increase Xcel has asked for in recent years, requesting a 6.6% jump in 2021. The PUC decided, earlier this year, to only grant a 2.7% increase for the company. Before that, Xcel requested much smaller rate increases for natural gas service in 2009, 2006 and 2004.

Minnesota Power was granted a rate increase earlier this year of 9.5%. The utility had originally asked in 2021 for a 17.6% hike and has challenged the ruling. Before that, Minnesota Power requested approval for higher rates in 2016, 2009 and 2008.

Separately, CenterPoint Energy also asked the PUC for an increase in gas rates. That request is scheduled to come before the commission later in December.