Information about Xcel Energy's Seasonal Tiered Rates
After more than two years of study and hearings, the Colorado Public Utilities Commission in 2010 approved "tiered rates" for Xcel Energy's residential electric customers in Colorado. The new rates became effective on June 1.
Tiered rates for residential customers apply in the summer months of June, July, August and September. Standard flat rates apply during all other months.
With tiered rates, the price paid by customers for electricity increases as a customer's electric use increases. The first 500 kilowatt hours (kwh) of electricity used during a summer month are billed at a lower rate; all subsequent kilowatt hours are billed at a higher rate.
The rate for the first 500 kwh of electricity is actually lower under tiered rates than what the summer rate would have been if we had not implemented tiered rates. Similarly, the new winter rate is also lower than it would have been.
Under tiered rates, only the rates for use above 500 kwh in the summer are higher than they would have been.
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Are tiered rates used in other states?
Yes. At least 16 other states use tiered rates, as shown in this chart.
How do I find out how much electricity I use each month?
Your monthly usage, in kilowatt hours, is shown on your monthly utility bill.
Click here to find the electricity usage level on your monthly Xcel Energy bill.
Xcel Energy also offers more detailed account information through their online "My Account" services.
How does my electric usage compare to others?
Different households use different amounts of electricity each month.
For residential customers of Xcel Energy, the average household consumes about 687 kwh per month during the summer months of June through September, and about 605 kwh per month during the other months of the year.
Click here to see how your usage compares to other customers' average use during the summer months.
How do Xcel Energy's tiered rates compare to other states?
Of the states using tiered rates in the summer, Xcel Energy's tiered rates are squarely in the middle.
Click here to see a chart comparing the tiered rate structures used in other states.
Why did the PUC approve tiered rates for Xcel Energy?
For years, Colorado`s peak electricity demand has been rising, driven by the growth in air conditioning, large-screen televisions, computers, and other electronic equipment. To serve our growing load, utilities must build new power plants, which are more costly than the existing plants. The plants built to handle summer peak needs are especially costly because they are needed only a few weeks during the year.
In short, our growth is causing electric rates to increase for everybody.
The PUC approved tiered rates because they more accurately reflect the cost of producing electricity. Electricity demand is highest in the summer, so Xcel Energy must build plants to meet the "summer peak." The first tier allows all customers to get their fair share of the older, lower-cost plants. The second tier is priced higher, reflecting the higher cost of the new plants built to meet the growing peak demand.
So, those who use more, and push up the summer peak, pay more. Those who use less, pay less. It is a question of fairness.
Click here to see a newspaper column written by former PUC Chairman Ron Binz addressing the need for tiered rates.
How will tiered rates affect my monthly bill?
Depending on how much electricity you use, your monthly bill could increase or decrease under tiered rates.
Generally, rates will go up a bit in the summer, but down in the winter.
An analysis of usage data shows that 871 kwh is the breakeven point. Customers whose average usage is above 871 kwh per month will pay more annually under tiered rates; customers whose average usage is below 871 kwh per month (about 70 percent of Xcel customers) will pay less annually under tiered rates.
See How Tiered Rates Affect Your Energy Bill
Click here to see a comparison of monthly bills under tiered rates and under the rates that would have been in effect if we had not approved tiered rates.
Does Xcel Energy earn more money from tiered rates?
No. The new tiered rates are designed so that Xcel Energy does not earn any additional money from tiered rates. The Commission first determined the reasonable revenue level for Xcel Energy and then calculated appropriate rates to collect exactly that revenue amount.
It works this way: the higher second tier rates are balanced out by lower first tier rates and lower non-summer rates. Xcel does not collect any additional revenue from tiered rates.
In addition, Denver Water uses tiered rates for water service in Denver. The water utility's rates are based on four usage blocks that increase in price as the customer uses more water in a month.
Click here to see the tiered rates system used by Denver Water. (The PUC does not regulate Denver Water.)
What about people who have medical conditions?
The Colorado Legislature passed a measure this year that allows the PUC to consider creating an exemption from tiered rates “based on a customer’s medical condition or use of an essential life support device.” The PUC expects to undertake a rulemaking to gather information on how tiered rates affect customers with medical conditions and how eligibility for an exemption would be determined. All stakeholders will be invited to provide input about this issue. However, rules creating a medical exemption, if adopted, would not be implemented until at least 2012.
In the meantime, Xcel Energy has indicated that it is prepared to work with customers with extreme medical conditions on a case-by-case basis. Such customers are encouraged to contact Xcel Energy.
What can I do to lower my electric usage and my bill?
Start with things you can do easily. Changing out old incandescent light bulbs for compact fluorescents, turning out lights and turning off televisions when not in use are a good start. Turn off computer printers and monitors when they are not needed. If you have air conditioning, consider moving the thermostat up a couple degrees.
By simply reviewing your own habits and finding one or two ways to be a bit more careful about your electric use will pay dividends in lower consumption and lower bills. Central air conditioners, electric clothes dryers, electric stoves, electric water heaters and large-screen televisions are some of the more common appliances that tend to use a lot of electricity.
If you have central air conditioning, check out Xcel Energy's Savers Switch program that can earn you a $40 rebate every October.
For information about bigger steps, such as a household energy audit, high efficiency appliance rebates or weatherization incentives, see the websites of the Governor's Energy Office and Xcel Energy. There is a wealth of information on these sites and help available to those looking to make improvements in their household energy efficiency.
Why the 500 kwh breakpoint?
Consumers should think of the 500 kwh breakpoint as a proxy for each customer's share of the older, lower cost, baseload generating stations. Use above that amount in the second tier can be thought of as a proxy for the added costs placed on the system by generating stations that are built to meet summer load.
As a practical matter, 500 kwh is a common threshold used by other states with tiered rates. It is set so that a majority of a utility's customers face the higher tiered rate in the summer months when electricity is most expensive.
In Xcel Energy's case, approximately 60% of its residential customers will have a portion of their bill charged in the second tier. This sends a price signal to the majority of customers to think carefully about energy decisions. It also raises the value of conservation because kilowatt hours saved in the second block reduce bills at the higher rate.
