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SAVE UP TO $1,500 IN REBATES

Steel T Heating and Air Conditioning and Xcel Energy have partnered up to offer up to $1,000 in rebates on a new Carrier air conditioner. Pair that with the Federal Tax Credits and you can save up to $1,500. With the rising costs of utilities and new two tiered Xcel rates now is the best time ever to increase the efficiency of the largest energy producer in your home. Take advantage now and eliminate that shock when you open your next utility bill.

XCEL ENERGY NEW TIERED RATES EFFECTIVE JUNE 1ST 2010

We wanted to give you a quick explanation about the new rate structure. To overcome this, consider a new system to save money and energy.

PSCo “Tiered” Rates Customer Q&A
What is a “tiered” or “inverted block” rate?

Under a tiered rate structure different prices are charged for specific amounts (or “blocks”) of electricity used during a month, measured in kilowatt hours (kWh). Each successive tier indicates more electricity used. The first tier is charged a lower rate while the next tier is subject to a higher rate.

Why are you implementing a tiered system?

The Colorado Public Utilities Commission (“CPUC” or “PUC”) requested that we provide several tiered rate options as part of Phase II of our May 2009 Electric Rate Case. We provided the requested options, and recommended a summer-only, two-tier rate structure as a bridge to more accurate time-of-use rates sometime in the future. Other parties in our rate proceeding recommended year-round inverted rates and three or four tiers.

On March 29, the PUC approved a two-tiered rate structure during the summer months (June-September) for all our Colorado residential customers. (In a rate case, Phase I determines the cost of service. The second phase determines the specific charges for customer classes to recover the costs identified in Phase I.)

The rationale for tiered rates is to more accurately reflect the cost of providing electricity service to customers. Our costs are higher during the summer, so the tiered rates provide a “price signal” to customers who can choose to use less electricity to manage their energy bills. We deliberately moderated the gap between the two tiers to lessen the impact on customers. In the winter there is no justification for the higher price signal.

What are the two rates?

For 0-500 kWh per month, the cost is 4.6 cents per kilowatt hour. For use that exceeds 500 kWh, the cost is 9 cents per kWh.

How long will the tiered rates be in effect?

A two-tiered rate structure will be in effect each year from June 1 through September 30, until the Commission modifies our residential rate structure in a future proceeding. During the other eight non-summer months, you will be charged the lower Tier 1 rate for electricity used.

How did you determine that 500 kWh should be the cut-off between Tier 1 and Tier 2 rates?

We proposed that threshold to ensure that most customers will be given a chance to weigh the option of incurring higher costs or changing their summer usage. The Commission ultimately approved our proposal.

How did you decide the rates for each tier?

We proposed an upper tier rate of 8 cents, and the Commission ultimately approved a rate of 9 cents. We then calculated the rate for the first tier based upon the authorized level of recovery from the PUC. While the 9-cent rate is higher than customers have experienced before, it is lower than the cost of producing and delivering energy during hot summer days.

How will tiered rates appear on my bill?

On the June and October bills only, three new line items under the “Residential General” portion of their bill that reflect the implementation of tiered rates.

The first line shows non-summer (before June 1) electricity use. The next two lines show June use under tiered rates. With tiered rates, the first 500 kWh charged the lower Tier 1 rate of 4.6 cents/kWh. This is also the rate for all their use during non-summer months.

Electricity use that exceeds 500 kWh is priced at the higher Tier 2 rate of 9.0 cents/ kWh. The Tier 2 rate is in effect only from June through September and reflects the higher cost to provide electricity during the hot summer months. On July through September bills, there will only be two new lines–Summer Tier 1 and Summer Tier 2–since, unlike in June and October, there is no non-summer electricity use.

How will you prorate customers’ May/June and Sept/Oct bills during the transition to and transition from tiered rates?

Because most customers are not billed on calendar months, but rather at various times of the month based on when their meters are read, prorating the May/June and September/October bills ensures that the customer’s summer consumption is correctly allocated between tiers regardless of the date that the customer is billed for the summer peak period.

In the example below, if we did not prorate usage (in May/June and Sept/Oct) between the two tiers, there would be an additional 500 kWh incorrectly billed in Tier 1 when they should be billed in Tier 2. This billing methodology ensures all customers are treated equally and do not pay more or less based on the date their meter is read.

Illustrative example

Calendar Month bill May 1-31 Jun 1-30 Jul 1-31 Aug 1-31 Sep 1-30 Oct 1-31 Total
Use (kWh) 1,000 1,000 1,000 1,000 1,000 1,000 6,000
Tier 1 500 500 500 500 2,000
Tier 2 500 500 500 500 2,000
Non-Summer (winter) 1000 1000 2,000

Prorated Bill based on meter reading 15th of month (30 day bill)* May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Total
Use (kWh) 1,000 1,000 1,000 1,000 1,000 1,000 6,000
Tier 1 250 500 500 500 250 2,000
Tier 2 250 500 500 500 250 2,000
Non-Summer (winter) 1000 500 500 2,000

Bill based on your calculation – no proration between tiers May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Total
Use (kWh) 1,000 1,000 1,000 1,000 1,000 1,000 6,000
Tier 1 500 500 500 500 500 2,500
Tier 2 500 500 500 1,500
Non-Summer (winter) 1000 500 500 2,000

*15/30 days = 50% x 500 = 250 kWh Tier 1

Read the testimony of Xcel Energy’s David Wolaver about the proposed proration.

Will tiered rates allow Xcel Energy to collect more money from residential customers as a whole than flat rates?

No. The additional revenue generated from the higher summer rate applied to usage about 500 kWh will be offset by the lower rate applied to both summer usage below 500 kWh and all usage during the other eight non-summer months. In other words, the tiered rates are designed to generate no more annual revenue than would a flat rate structure. Of course, an individual customer may pay more or less under tiered rates.

How do I know if I will pay more or less under tiered rates?

In general, customers who use less electricity than the typical residential customer and customers whose use is more concentrated in the winter will pay less under the tiered rate structure. However, the primary driver of customer bills at any time is the amount of energy they use.

I received my May/June bill and it seems the Tier 1/non-summer rate is a 40 percent increase over the non-summer rate I was paying in May. Why is that?

At the same time that the tiered rates went into effect, we made several other changes to some of our riders, which are used for specific components of a customer’s electric bill such as fuel for electricity production and other capital system investments such as renewable energy, and projects for environmental improvements. These account for roughly 48 percent of a customer’s overall residential electric bill.

Beginning June 1, we eliminated the Air Quality Improvement Rider (AQIR) that previously appeared as a separate charge on your bill and moved this recovery cost into your base rate. We did the same with the General Rate Schedule Adjustment (GRSA) and we dramatically reduced the Transmission Cost Adjustment (TCA). You should see two TCAs – one for one for May and one for June and you should see that only a portion of your usage (the May part) was charged to the GRSA or the AQIR.

The flat rate throughout the year would have been 5.2 cents per kWh without tiered rates. Now the flat non-summer rate is 4.6 cents.

I have an on-site solar system that sometimes produces a surplus of energy. With the two-tiered rates, at which rate will my surplus be credited to my account? Also, does the new tiered rate structure impact how much I pay each month for electricity?

Our on-site solar program was designed to promote systems sized to offset a customer’s electric consumption. Those enrolled in an on-site solar program with a system that produces a surplus of energy during a billing cycle receive credits that are carried forward to the next month. However, these kWh credits are not assigned a monthly monetary value. Program participants have the option of having these credited kWhs rolled over from year-to-year or receiving compensation at the end of the year for the total excess kWh produced. The year-end payment is calculated on the Average Hourly Incremental Cost of Electricity from the previous year.

How much a customer pays during the summer months when tiered rates are in effect will be based on their net electric consumption – as it will be for all of our residential electric customers.

What has happened around the country when tiered rates were implemented?

On average, utilities have seen some reduction in energy usage when tiered rates are implemented. If customer use falls entirely in the lower tier, they will see lower costs and will have some incentive to increase usage. Customers in the upper tier will tend to lower usage. We expect that the highest elasticity will be in the upper tier and those customers will lower their usage more than customers in the lower tier will raise theirs, resulting in lower sales overall. Based on results for other utilities, we estimated that we would see just under a 1 percent reduction in class energy sales (75 GWh).

Businesses use more electricity than residential customers. Will you charge business tiered rates too?

Only residential customers pay tiered rates, but businesses will pay seasonally differentiated rates. Small businesses will continue to pay one rate for all of their usage in the summer, and a lower rate for all of their usage from October through May. Large businesses will continue to pay a demand charge that is higher in the summer. We have also offered time-of-use energy rates to large customers.

What are you doing to keep rates low for customers?

We are constantly working to improve productivity and control our costs. In the short-term, we have been informing customers of the rate change, which seems to be working. We also have a tool for them to look at their usage and a tool to estimate your bill impacts. We are reminding customers about our demand side management programs and pointing customers to low income assistance available through the Company and others.

In the long-run, we are always looking at the best way to cost-effectively meet energy demand through the choice of generation facilities to the portfolio of demand side management programs that we offer.

Are tiered rates just social engineering, designed to force customers to conserve by pushing through higher rates?

There is always an element of social engineering or public policy in how electric rates are set. The objective of tiered rates is not to raise rates arbitrarily to induce lower customer use but to design rates to better reflect our cost of providing service. At some point we hope to offer time-of-use rates, which are more costly to implement than tiered rates but reflect cost variations more accurately. Until that time, tiered rates are an attempt to send better price signals without requiring more expensive metering.

How do you calculate the average customer monthly usage?

We divide annual usage by the number of customers in the class and by 12 months.

How many customers are average?

Probably not very many. We use the average customer as a way to put rate changes into context, so customers can draw a comparison with their own situations.

What are you doing to help customers?

Customers can go to xcelenergy.com and sign up for My Account to look at their previous year’s energy use and, with that information, estimate what this summer’s use might be. While in the Xcel Energy website, you also can find energy-saving tips and learn about available energy conservation programs.

There’s also a bill estimator that customers can use to estimate the impact of tiered rates and other June 1 changes on their bills. Customers can also use this bill estimator to estimate the lower winter rate that will be in effect the other eight non-summer months (Oct-May) of the year. Energy conservation is the easiest way to manage your energy budget. We have a variety of energy-saving tips, no-cost and low-cost solutions and rebate programs for you to choose from on our website. Or call us at (800) 895-4999 to speak with one of our customer service representatives, who can explain the options and programs to you.

If you anticipate or are having a difficult time paying your bill, please call us right away. We can create a payment plan to help you catch up on the amounts owed plus provide information about our energy assistance programs as well as state and non-profit organizations that offer energy assistance funds.
Where can I get more details about tiered rates?

Customers interested in looking at their electricity use last year and tracking their current energy use can sign up for My Account. Learn about the variety of energy-saving tips, no-cost and low-cost solutions and rebate programs we offer on our website, or call us at (800) 895-4999.

The PUC has posted a publication called “Understanding ‘tiered’ or ‘inverted block’ seasonal rates”.

Additional information about tiered rates can be found on the Colorado Public Utilities Commission’s website.