All about Xcel’s time-of-use rate

You may have recently seen this notice on your Xcel MyAccount letting you know there is a new time-of-use (TOU) rate that residential customers can opt-into.  Xcel's new TOU rate is an optional rate offering that charges different costs per kilowatt hour (kWh) depending on what time of day you're using electricity. Read below to learn everything you need to know about the new rate and how it could impact you.

How does Xcel’s TOU rate work? 

Last year, the Minnesota Public Utilities Commission (PUC) approved a new opt-in time-of-use (TOU) rate for residential customers that went into effect this past June.  

Under TOU, non-holiday weekdays from 6 p.m. to 9 p.m. are more expensive, peak hours, and the least expensive off-peak hours will be between midnight and 6 a.m. All other hours (including 6 p.m. to 9 p.m. on weekends and holidays) fall under the base rate.   

The peak and base rates also vary seasonally, with higher rates in summer (June to September) than non-summer or winter months (October to May). The off-peak rate is the same throughout the year.  

For comparison, the current one-period standard residential rate is 13.1¢/kWh in summer, and 11.2¢/kWh in winter. Just like the standard rate, the actual costs per kWh will change periodically when Xcel requests (and is approved) to increase rates through a general rate case.  

Important things to keep in mind 

The TOU rate is optional: This is an optional rate offering. Customers on Xcel’s standard  rate will not be automatically put on the TOU rate. If you decide to opt-in to the TOU rate, you can transition back to the standard rate at any time.  

12-month commitment: Customers who enroll in the TOU rate and decide to switch back to the standard rate can do so any time, at no cost. However, if a customer who opts out of the TOU rate then seeks to re-enroll in the TOU rate again within 12 months of having opted-out, the customer will then be required to stay on the TOU rate for a minimum of 12 months. 

For customers who were on Xcel’s piloted “Flex Pricing” rate: The only customers who were automatically enrolled in Xcel’s TOU rate were customers on Xcel’s previous, piloted three-period TOU rate referred to as “Flex Pricing.” Unless a Flex Pricing customer contacted Xcel prior to April 30 to request to opt-out, those households were automatically transitioned to the new TOU rate. Customers can still contact Xcel today and request to switch to a different rate, but the previous Flex Pricing option is no longer available.  

Customers on TOU can also enroll in the discounted electric space heating rate: If you are on the TOU rate, you can still sign up for the electric space heating rate if your primary heat source is electric. From June through September, customers would follow the typical TOU rate structure, but from October through May, customers are charged a discounted rate for all electricity used during all times of the day. The electric space heating rate is a great way for customers who use air source heat pumps or electric resistance (baseboard) heating to save money during the heating season.  

Xcel still offers its two-period time-of-day rate: Xcel still offers its two-period time-of-day (TOD) rate, which includes only an off-peak and on-peak period (no base). Weekdays between 9 a.m. to 9 p.m. customers are charged 26¢/kWh in summer months and 21¢/kWh in winter months. All other hours are off-peak and charged at 5¢/kWh, year-round.

 What’s the purpose of TOU rates? 

Some customers can save: Customers who have the flexibility to avoid or minimize high electric use during peak hours would be the best candidates for this rate. If you are a customer who uses a large portion of energy overnight (during off-peak hours from midnight to 6 a.m.) or can shift your use of large electric appliances like laundry machines and dishwashers to hours outside of the peak (6 p.m. to 9 p.m.), the TOU rate could help you save money on your monthly electricity bill.   

• Tip: Try the rate comparison tool in your My Account or call Xcel’s customer service at 800-895-4999 to help you understand how TOU could impact your bill based on your household’s past energy usage patterns. Be aware these are only estimates and actual bill impacts may vary. 
• Stay Tuned: CUB will soon publish an article exploring which households are a good candidate to switch to Xcel’s TOU rate. 

Aligns the actual cost of using electricity more closely with customers’ use: TOU rates are designed to be revenue neutral, meaning they are calculated so that the utility should not generate any more profit than it would under the standard rate. The cost of energy is higher during peak hours to reflect the actual system costs of providing electricity during those times. Because more people are using energy, the electric grid has to work harder—and utilize additional, often more expensive resources—to meet the increased demand. On the other hand, the lower cost of energy during off-peak periods reflects the fact that cheaper and more abundant wind energy is available for use during that time. This means that under the TOU rate, customers who use more energy during the peak period, driving the higher cost during that time, are paying rates that more closely reflect the actual cost of energy during that time.  

Avoid or delay additional investments in distribution and generation: Utilities plan to have enough capacity to meet customer demand. During “peak” periods of the day, when customers are using more energy than usual, the utility must often rely on additional sources of generation, called "peaker" plants, to help meet demand only during those high-use periods. High peaks are not only more expensive and require additional infrastructure investments to deliver the electricity, they also put immense strain on the electricity grid which can hinder reliability. If enough customers shift their electricity usage outside of peak hours, fewer "peaker" plants or other generation resources will be needed to meet demand. The utility can then defer, reduce, or avoid additional investments—reducing costs for customers in the process.    

Accelerates decarbonization of electricity by encouraging usage when renewable energy is most abundant: Renewable energy like wind and solar are some of the cheapest generation options, have very low operating costs once built, and do not require the purchase of fuel to generate electricity. TOU rates incentivize customers who are able to manage and change their energy use habits to use electricity when renewable energy, like wind, is most abundant. Conversely, peaker plants that are relied on for high-use periods are often powered with natural gas or fossil fuels, so reducing energy consumption during those periods can also reduce the greenhouse gas emissions from those plants.

If you have questions about whether Xcel’s TOU rate is right for you, you can sign up for a free personalized energy bill consultation to learn more about your rate options.