Xcel Energy’s proposed pilot project would provide equitable assistance to 23,000 homes

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Fresh Energy is working to ensure that energy is affordable for all Minnesotans. We shape policies that accelerate the energy transition, and a core value that’s built into our policy work is equity. That means that when we craft policy solutions, we’re laser-focused on both equitable outcomes so that all Minnesotans can benefit from a carbon-free economy, as well as equitable processes that get us there fairly, too.

A promising, new equity program that Fresh Energy is excited to support is a pilot project from Xcel Energy that is currently pending before the Minnesota Public Utilities Commission (PUC, or Commission). If approved, Xcel’s new program would provide direct, automatic energy assistance to under-resourced Minnesotans across the state—providing help for an estimated 23,000 households.

Keep reading to learn about Xcel Energy’s new program, how it will advance equity in Minnesota, and how Fresh Energy is plugging in.

What is Xcel Energy’s petition for an automatic bill credit?

Xcel Energy has proposed a nation-leading, first-of-its-kind pilot project that would automatically provide a bill credit to 23,000 households in 77 under-resourced communities across Minnesota; the average bill credit is approximately $450 annually with some households receiving $1,200 annually. Each community that would receive assistance has a high energy burden, which means their populations spend a disproportionately high percentage of their income on their energy needs. While the average Minnesotan’s energy burden is 2%, low-income households, which are disproportionately people of color, average an 8% energy burden. Xcel’s program would reduce the energy burden in 77 communities in Minnesota to no more than four percent.

What makes Xcel Energy’s program to cut bills unique is its direct, automatic approach: while most monetary assistance programs require customers to apply for assistance, Xcel Energy’s program would cut administrative costs and red tape by automatically providing monetary assistance directly to households that reside in 77 selected communities. Xcel’s proposed pilot program would cost $10 million over two years. The program is funded through settlement proceeds from the Department of Energy that are typically rebated to customers; the average annual cost to Xcel Energy’s residential customers is $1.50.

How Xcel Energy’s automatic bill program would advance equity in Minnesota

Many Americans have to make the difficult decision between “heat or eat,” choosing between paying their electricity bill and buying food and medicine. In 2021, 51.2% of low-income households reported they did not purchase food or medicine in order to pay their energy bill at least one month in the prior year.

It’s an unfortunate reality that many under-resourced Americans must struggle to find adequate housing, food, childcare, and transportation while getting by, leaving little other time or energy for anything else, including applying for monetary assistance programs.

Xcel Energy’s proposed bill credit would automatically and directly provide energy assistance to households without requiring individuals to go through a challenging and time-consuming process. Xcel would use data from the U.S. Census, which has mapped out communities where households spend a large proportion of their income to purchase energy, and automatically provide the bill credit to households in 77 of these census tracts statewide.

The idea to cut electricity bills for under-resourced communities isn’t new. In fact, the federal government established an aid program in 1981 called the Low Income Home Energy Assistance Program (LIHEAP, pronounced “lie-heap”) to provide monetary assistance for qualifying households’ energy costs, similar to how the Supplemental Nutrition Assistance Program (SNAP) provides food assistance to under-resourced families.

While LIHEAP has helped millions of families reduce their energy burden, a well-understood problem with the program is that it doesn’t reach nearly as many people as it should. In fact, only 20% of those eligible for LIHEAP receive assistance, which means 80% of under-resourced households that are eligible for energy assistance are not receiving it. Many households that would qualify for LIHEAP don’t know it exists, and even if they do, there are many barriers that prevent them from applying: confusion over eligibility, shame and stigma associated with assistance, and difficulty navigating the application process—which is multiplied by having little time or energy to apply when trying to get by.

Xcel’s new automatic bill credit bypasses those barriers: instead of spending resources to increase awareness and guide applicants through LIHEAP’s time-intensive process, Xcel’s program would automatically enroll entire communities with high energy burdens into its bill credit program. This will help those in need without requiring them to go through an arduous application process by using publicly available U.S. Census maps that show population and income information to locate areas of extreme poverty and apply monetary energy assistance directly to the households.

If the PUC approves Xcel’s pilot project, 23,000 households in 77 census block groups will automatically receive assistance, providing a community-level investment where everyone in the community will benefit. Households in these communities can choose to opt out of the program if they wish.

Xcel Energy’s automatic bill credit petition has wide support

More than twenty community-based organizations, many of whom have never participated in a public utility proceeding, were involved in developing this pilot concept and signed their support on the petition to the PUC.

Fresh Energy signed on, along with Sabathani Community Center, UNIDOS MN, Community Stabilization Project, Energy CENTS Coalition, and more. The wide-ranging and novel support from community-based organizations in Minnesota showcases how Xcel Energy’s innovative program can better address systemic barriers like low enrollment and administrative complexities to effectively provide assistance to under-resourced Minnesotans.

“This is the first program to provide automatic energy assistance in the nation,” said Shubha Harris, Equitable Policy and Affordability Consultant at Fresh Energy. “If approved, Minnesotans that are struggling to pay their electric bills will receive relief automatically, without having to go through an arduous application process. With the price of food and rent soaring, assistance with utility bills is especially crucial.”

What’s next?

Xcel Energy filed their petition with the PUC on April 16, 2024. The Commission has opened a comment period that closes at the end of June, after which Xcel Energy will have several weeks to provide reply comments. Then, PUC staff will evaluate the proposal and issue a final decision, likely later in the fall of this year.

Fresh Energy looks forward to providing comments to support Xcel Energy’s petition to explore how an automatic bill credit could reimagine how we provide energy assistance to our society’s most vulnerable populations.