PUC approves Xcel’s new optional time-of-use rate for residential customers  

On March 6 the Minnesota Public Utilities Commission (PUC) held a hearing to review Xcel’s proposal for a new residential time-of-use (TOU) rate. Xcel initially proposed the rate in December 2023, following a two-year TOU pilot. Last week, the Commission approved the optional rate with minor modifications.  

You can read our earlier articles on Xcel’s TOU rate here and here, for more background on how we got to the current proposal and CUB’s concerns along the way. 

What will the rate look like? 

Once implemented, Xcel’s new TOU rate will be available on a voluntary basis to all residential customers. Under this rate structure, the cost per kilowatt hour (kWh) of energy charged to customers is higher during peak periods than during off-peak and base hours. The more expensive, peak hours will be between 6 p.m. to 9 p.m. on non-holiday weekdays, 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. 

On-peak costs will be 2.7 times higher than off-peak in the summer, and 2.2 times higher in the winter. The summer base rate is slightly higher than the current standard one-period rate (13.07 cents/kWh), and the winter base rate is slightly cheaper. Similar to Xcel’s standard, one-period rate, the actual prices during these different periods may fluctuate over time if the utility has a new rate case approved.  

The graphic below shows the approved rate (excluding fuel costs): 

Why TOU rates can be good for customers 

CUB has previously described the potential benefits a successful TOU rate could generate for residential customers—ranging from monthly bill savings, increased fairness, and greater utilization of clean, carbon-free energy. Importantly, 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.  

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. Unless a customer has opted-out of Xcel’s new advanced metering infrastructure, they should have access to see their energy usage data via the “My Account” page. This information can help customers gain insights into their energy usage patterns and better understand when they use the most electricity.  

Optional electric space heating rate 

The PUC also approved a new electric space heating rate for Xcel’s residential customers. This rate will provide a significant discount in winter months (6.537¢/kWh) to customers who use electricity as their primary source for heating. This includes customers with heat pumps, as well as those with electric baseboard heating. The PUC directed Xcel to make the new space heating rate available prior to rollout of the TOU rate—so while the TOU rate will likely not be available until 2026, customers will have the option to enroll in the electric space heating rate one month after the PUC’s written order is published (sometime late spring/early summer).  

Next Steps 

There are still several steps needed before Xcel can implement its new TOU rate. Within 90-days of the PUC publishing its written order, Xcel will submit a compliance filing that details its plan for marketing the rate and engaging in customer outreach. CUB intends to actively review these proposals to ensure Xcel is using the most cost-effective and helpful tools to communicate with customers about the new rate. Xcel will also be required to include a new proposal in its compliance filing to allow net-metered customers to participate in the TOU rate.  

Once the compliance filing is submitted, there may be an opportunity for public comments to weigh in on what educational tools and communication methods you, as a customer, would like to see or think will be effective. Watch CUB’s newsletter to hear about those opportunities to make your voice heard, and stay up-to-date on utility offerings that help you save money and decarbonize your energy use.