Xcel Energy proposes step forward in good rate design

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On November 1, 2017, Xcel Energy filed a proposal with the Minnesota Public Utilities Commission to test time-of-use rates with roughly 10,000 residential customers in two parts of the Twin Cities metro area.

  • Time-of-use rates reflect the actual costs to generate and deliver electricity at different times of the day, encouraging customers to use less during the most expensive times of the day.
  • Fresh Energy advocates for time-of-use rate design because it provides benefits to both the electric grid and directly to consumers.
  • Using more electricity during cheaper overnight hours also drives wind development on the system, reducing the carbon impact of generating electricity in Minnesota.

The purpose of the proposed pilot is to assess implementation and education needs and strategies for time-of-use rates, analyze impacts to customers (particularly low-income customers), and inform how time-of-use rates might be applicable to the entire Xcel residential class in the future. Under the proposal, residential customers in two geographic sections of Xcel Energy’s Minnesota service territory, the west metro suburbs around Eden Prairie and the Minneapolis urban core, will be placed on a time-of-use rate for two years. Customers will receive significant education regarding the impacts of the new rate design on their bills and how to alter their energy use to best take advantage of the new rates. Importantly, these rates are not designed to make more money for Xcel. Instead, they are designed to lower costs on the system and give customers the ability to affect their electricity bills by controlling when they use electricity.

To ease the transition to time-of-use rates, customers on the new rate will be protected in the first year of the pilot by paying what they would under existing rates if their bill increases by 10 percent or more. For low-income customers, bills will be trued up to existing rates regardless of the rate increase in the first year, and will be trued up if their bill increases by 10 percent or more in the second year. This ensures that customers have time to adapt to and learn from the new rates.

Fresh Energy has been actively involved in regulatory proceedings, stakeholder processes, and engagement with Xcel Energy on this proposal and time-of-use rates broadly. While this is a positive step forward on good rate design practices, we will continue to assess this proposal and recommend changes to ensure that this pilot maximizes the achievable benefits of time-of-use rates in Minnesota.

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