Understanding Your Bill
Your electric bill will have multiple types of charges. Those charges include the service charge, energy charge, riders, and taxes. The actual costs for service and energy and the line items you will see on your bill will vary by utility. The state Public Utilities Commission (PUC) sets the rates of Minnesota’s investor-owned utilities (IOUs) — Xcel Energy, Minnesota Power, and Otter Tail Power — in public proceedings called rate cases. Municipal and cooperative utilities are not rate-regulated by the PUC; their rates are set by local boards or commissions (with the exception of Dakota Electric Association, a cooperative utility that has chosen to have its rates set by the PUC). If you have questions on your bill, don’t hesitate to reach out to CUB to ask questions. Your utility’s website should also have resources online going over how to read your bill and what the different charges are for.
Similarly, your natural gas bills will also be broken out into multiple different types of charges. Investor-owned natural gas utilities in Minnesota include Centerpoint, Xcel Energy, and Minnesota Energy Resources and has rates set through PUC rate cases similar to electric investor-owned utilities. The overall structure to natural gas bills will be similar to electric bills in that they will include the service charge, energy charge, riders, and taxes. Natural gas bills will differ from electric bills in there will be significant differences from season to season. Since natural gas is primarily used for heating, winter bills in Minnesota will be significantly higher than those in the summer.
The service charge is the flat monthly fee you pay every month for access to energy. The service charge is fixed every month so even if you did not use any energy in a given month, you would still be charged for access under the service charge. This charge varies by utility. In many cases, these charges will be significantly higher if you get your electric service from a cooperative utility or live in a rural area based on the higher cost to serve areas with low population density.
The fixed service charge can be more significant on natural gas bills based on the seasonal changes discussed above. The service charge will be a much larger portion of a summer natural gas bill and a much smaller portion in the summer.
The energy charge on your bill is the cost of the electricity you use and is billed by kilowatt-hour (kWh). Utilities will read a customer’s meter to determine the amount of electricity used. The average Minnesota electric customer uses about 800 kWhs of electricity each month. To help put this into perspective, running ten 100 watt light bulbs for one hour is one kWh. Similarly, the energy cost on natural gas is the cost per therm multiplied by the number of therms you use. While the service charge is fixed, the energy charge is variable. To reduce your energy charge, be aware of energy waste in your home and consider implementing energy efficiency measures.
Many utilities will also include various riders on your bill as well. Riders are charges for specific aspects of your utility service, such as the cost of fuel. Riders can be based on usage or can be a flat monthly fee. Because many riders are variable charges, reducing you energy usage in a month can further reduce your bill by lowering the amount of riders you pay.
Finally, taxes on your bill vary based on where you live. All bills will include state and local taxes with some also including county taxes. Some cities also include franchise fees and other taxes on your bills as well. Most cities will only include variable taxes on their bills, but some cities also have flat fees included such as Minneapolis.
What to look for
It’s always good to take a look at your utility bills each month to ensure everything looks right. While it is not frequent, we at CUB do see billing errors. This is an easy step to take to ensure you are not overpaying for your service.
How would you know if you are overpaying? For reference, the average Minnesota family of four uses about 800 kWhs of electricity every month and pays around $96 per month for electricity. If you have fewer people in your household and are paying significantly more than this, chances are you can find ways to become more efficient and save money, or there may be an error on your bill. If this is the case, you’re welcome to reach out to CUB and we can help sort out any problems.
Natural gas bills are much more difficult to determine an average for as it varies widely depending on the size and efficiency of the home, as well as the temperature outside. “Normal” gas bills could range anywhere from $100 to $200 a month based on these factors. If you think you are paying too much for natural gas, please reach out to CUB and we can help find ways to reduce your bills.
Glossary of terms
A/C Cycling Program
Many utilities offer credits in the summer months in exchange for the ability to cycle air conditioning units during periods in which there is a high demand for electricity to lessen the burden on the system.
The affordability charge assists low-income customers with bill payment assistance and discount programs. This is a fixed cost each month.
Basic Service Charge
This is a fixed charge you pay each month, regardless of electricity use. This charge covers the cost of connecting you to the grid and services provided by the utility.
Decoupling Adjustment (Xcel)
Decoupling is a policy that separates utility profits from total electric or gas sales to ensure utility revenue recovers costs and a fair return on investment. This adjustment can show up on your bill as either a surcharge or credit depending on previous sales.
The energy charge is the amount of electricity you used in kWhs in a given month, multiplied by the price per kWh. In many service territories, this charge varies by season. In Minnesota, energy charges are usually higher in the summer.
Fuel Cost Charge
This charge fluctuates based on the price of fuel used for electric power generation. This is a pass through charge meaning your utility does not make a profit on the cost of fuel.
Interim Rate Adjustment
When an Investor-Owned Utility files a rate case, the Public Utilities Commission will grant a portion of the rate increase the utility is asking for in the interim. This is recovered in the interim rate adjustment. If, at the end of the rate case, the interim adjustment was found to be too high, customers will be rebated with interest.
Inverted Block Rate (Minnesota Power)
Minnesota Power uses an inverted block rate to recover customer’s energy charge. Under this system, there are separate rate blocks based on the amount of electricity you use and within each block you are charged for the amount of energy you use. The more electricity you use in a month, the more money you will pay per kWh.
A kWh is the standard unit of measurement utilities use to measure a customer’s energy consumption.
The resource adjustment varies based on the amount of electricity you use. This charge covers various programs and projects undertaken by the utility including Conservation Improvement Programs among others. This charge includes the cost of fuel in the case of Minnesota Power.