Minnesota: Xcel Energy Proposes Step Forward in Good Rate Design

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

The purpose of the proposed two-year pilot is to assess implementation and education needs and strategies for TOU rates, analyze impacts to customers (particularly low-income customers), determine the ability of TOU rates to reduce peak demand, and inform how TOU rates could be applicable to the entire Xcel residential class in the future. Under the proposal, which was designed to be revenue-neutral, 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 TOU rate for two years. Customers will receive significant education regarding the impacts of the new rate design on their bills and how to alter the energy use to best take advantage of the new rates.

To ease the transition to TOU 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, determined as Low-Income Home Energy Assistance Program (LIHEAP) recipients, 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.

Xcel’s proposed TOU rate structure, which was developed with the help of outside consultant Strategen Consulting, includes a three-part structure with a 3–8pm on-peak period, 8pm-12am and 6am-3pm mid-peak period, and 12–6am off-peak period. As shown in the chart above, the ratio of the on-peak to off-peak rates is just over 4:1.

Though some details of the pilot will be debated in the regulatory process, the development of this proposal was done with significant stakeholder input within and outside the formal regulatory process.

Though some details of the pilot will be debated in the regulatory process, the development of this proposal was done with significant stakeholder input within and outside the formal regulatory process.