Xcel wants to charge more during ‘peak’ time, company says new plan can save customers money

Xcel Energy variable rates plan

Xcel Energy variable rates plan

While running the dishwater overnight is easy enough, doing laundry after midnight isn’t many people’s cup of tea…but under a new proposed plan by Xcel Energy, the energy company said people can save money on their bills if they do.

While it still needs approval by the state’s public utilities commission, Xcel said its proposed residential time-of-use rate design is aimed at easing strain on the power grid while saving its customers money.

Currently, according to Xcel Energy, most customers have a flat rate during the day of 13.069 cents per kilowatt hour (kWh) from June to September, and the flat rate for the other eight months is 11.364 cents per kWh.

Moving forward, the company wants to split the day into three parts, charging different rates for each time period. Here is a breakdown of the proposed time-of-use summer rates.

  • Off-peak: 12 a.m.–6 a.m.=3.825 kWh
  • Base: All other hours=14.824 kWh
  • Peak: 3 p.m.–8 p.m.=27.845 kWh

According to Ahmad Faruqui, an energy pricing expert with decades of experience in researching time-of-use policies, it’s important for customers to pay close attention to changes like these and to opt-out, if possible, if the plan isn’t right for them.

As for the energy companies, Faruiqui says their main benefit is the ease of their power grids during the peak hours of the day.

“That eliminates the need for running expensive peaking power plant, which run on natural gas and so on,” Faruiqui said, adding: “They can in the future, if their peak demand is not growing very fast, they will not have to invest in those plants. So their costs go down.”

This is addressed in a statement from Xcel surrounding its proposed time-of-use rate design.

We are always striving to keep bills low, provide reliable and renewable energy at an affordable cost, and offer the options and information that our customers want. The Public Utilities Commission asked us to take the next step by proposing a plan to make a Time of Use rate the standard choice for Minnesota residential customers beginning in 2025. With a Time of Use rate, customers can save money by shifting some of their electric use – such as a dishwasher, washing machine or electric oven – to non-peak periods. It’s important to note that this would be a choice for customers. Our customers could opt out and have their service changed back to a rate that does not vary by time periods.

A Time of Use rate gives customers more control over their electric bills, because how much you pay is determined both by how much electricity you use and when you use it. Customers would pay less for electricity that they use earlier in the day, later in the evening and overnight, when fuel-free wind energy is abundant. By adjusting your energy use to off-peak hours, you should experience cost savings. As you adjust your usage to off-peak hours, we can utilize more of the clean energy, such as wind, that is typically abundant at those off-peak times. You would be able to see when you’re using energy in the My Energy portal within My Account. A Time of Use rate reduces the total amount of energy that we need to provide during peak times when everyone is using electricity. This would allow us to avoid building new power plants, keeping the total cost of electricity lower.