Lisa Ferreira’s hot tub became a little less hot and her washing machine a little more nocturnal when she and her husband tested out the new electricity rates that Xcel Energy now wants to extend to all 1.2 million of its residential customers in Colorado.
Ferreira and her husband were part of Xcel Energy’s two-year pilot for “time-of-use rates,” which charged households more when electricity was in high demand and much less during low-demand periods.
“We made lots of little adjustments,” said Ferreira, who owns a home in Denver that was built in 1891. “We started doing the laundry first thing in the morning or late at night. We changed the timer on the hot tub to miss the 2 p.m. to 6 p.m. peak period, as well as the timer on the evaporative cooler and the thermostats.”
The result of shifting away from the peak-demand charge of 18 cents a kilowatt-hour to the 8 cents per kWh charged overnight? A $60 cut in the couple’s monthly electricity bill.
Now Xcel is asking the Colorado Public Utilities Commission to put all residential customers on time-of-use rates to blunt the demand for electricity on summer afternoons and early evenings.
Consumer advocates, however, have concerns. While some customers, like the Ferreiras, could see savings, others — particularly low-income families and the homebound — could suffer.
“People who are going to be penalized by this are people who are home more, those who work at home, the elderly, those on disability,” said Bill Levis, the former executive director of the Colorado Office of Consumer Counsel and a consultant for AARP, which represents retirees and older citizens. “They have to think this out better.”
Overall, time-of-use rates are designed to be “revenue neutral,” which is to say that a utility doesn’t make more money off of them. “But some bills will go down and some will go up,” said Ryan Hledik, a principal with the Brattle Group, an energy and economics consulting firm. “There are winners and losers.”
In its filings to the PUC, Xcel said it does not expect a big impact on low-income household bills and that those customers will benefit from the lower rates (part of keeping things revenue neutral) in the winter when they tend to use more electricity.
“We are providing more control to our customers over their energy usage and bills,” said Jerome Davis, an Xcel regional vice president.
Under the utility’s proposal all residential customers would go on the time-of-use rate from June to September, no exceptions, no other option.
Using electricity between 3 p.m. and 7 p.m. – the peak period – would cost 11.1 cents a kWh, the electricity charge during the “shoulder” periods (11 a.m. to 3 p.m. and 7 p.m. to 10 p.m.) would be about 8.3 cents, and for the off-peak period (10 p.m. to 11 a.m.) it would be about 5.5 cents per kWh.
By way of comparison, under Xcel’s current two-tier summer rates customers pay 5.461 cents for each of the first 500 kWh and 9.9 cents for each kWh above that. The average Xcel household uses about 715 kWh a month during the summer, according to a study done for the utility by Navigant.
Xcel has proposed moving customers to the new rate structure starting in 2021, as new smart meters are installed, a program that will run into 2024. The current electric meters record monthly usage. The new meters do it every 15 minutes.
Without smart meters, known as Advanced Metering Infrastructure, time-of-use rates are impossible. Xcel has already won PUC approval to spend $350 million in base costs and $69 million in contingencies to install smart meters and add that to customer charges.
AARP said, in comments filed with the PUC, it was particularly concerned about low-income customers who use 500 kWh a month or less since it sees no way that their bills will not go up, no matter what they do.
Steven Wishart, Xcel manager of pricing in planning, said that in his analysis of the Xcel pilot the maximum bill increase was $4 per month.
Xcel isn’t alone in seeking to adopt time-of-use rates. Utilities from Virginia to California are already using or experimenting with the time-sensitive rates, which they see as more fairly reflecting the cost of electricity while reducing expenses.
The electric grid has to be built for the maximum demand on the system – usually on very hot or very cold days – even though those peaks can be few and far apart. Still, when they come, utilities must switch on expensive “peaker” plants or buy costly wholesale electricity.
Reducing the peaks can save money, not only for the utility but for its customers since they ultimately pay for the expensive energy. A Berkeley National Laboratory study estimated that if Californians could shift 20% of their demand out of the peak period to the early afternoon when there is ample solar generation, they could save $700 million a year by 2025.
The increase in renewable energy generation and the addition of electric vehicles (EV) and rooftop solar arrays to the grid are also “creating a more urgent need for better rate design,” Hledik said.
“We can’t have everyone plug their EVs into a Level 2 charger in the evening when there are other electric demands,” Hledik said. Level 2 chargers are the most common home charging stations for EVs.
In California, some of the cheapest energy is in the middle of the day thanks to the state’s 26.2 gigawatts of photovoltaic capacity – nearly five times more than any other state. In Texas, the leader in wind generation with 29 gigawatts of capacity, some of the cheapest electricity is available at night.
“The goal in the past has been dealing with peak load, but at the same time we need to know how to tap dance with renewable energy,” said James Fine, an economist with the Environmental Defense Fund. “The reality is, to have more clean energy on the grid, the time you use energy matters.”
While consumer advocates, as well as the PUC staff, agree time-of-use rates have benefits, they still worry there could be adverse impacts on vulnerable households.
“It isn’t that we are against the rate design in general,” said Andrew Bennett, director of advocacy at Energy Outreach Colorado, which helps low-income families pay their utility bills. “For a lot of these families the consumption isn’t discretionary … They don’t have the ability to adapt.”
Bennett estimated that about a quarter of Xcel’s residential customers qualify as low-income households.
Cindy Schonhaut, the Office of Consumer Counsel’s executive director, said her office is reviewing the Xcel plan and will intervene in the PUC case. “The OCC supports time-of-use rates,” she said. “We just don’t want to see harm come to low-income users from time-of-use rates.”
The City of Fort Collins municipal utility moved all residential customers to a year-round time-of-use rate combined with a tiered summer rate in 2018. In its analysis of its pilot program, the utility found that one out of four low-income customers were negatively impacted by such a rate.
“These are low-income customers with higher-than-average consumption that may not have the means to invest in energy efficient measures,” the city analysis said.
In Illinois, the Citizens Utility Board, a nonprofit representing residential utility customers, found that 70% to 75% of low-income households benefited from the rates while the rest saw a bill increase, according to David Kolata, the board’s executive director.
“Not every low-income customer should be on a TOU [time-of-use] rate, those folks should be held harmless,” Kolata said. “To shift load you don’t need everyone to be on the rate.”
Other utilities with time-of-use rates have taken steps to address the impact on low-income customers’ bills.
In Fort Collins, families below 165% of the federal poverty level ($43,230 for a family of four), who are enrolled in the Colorado Low-income Energy Assistance Program, qualify for a 23% discount on time-of-use rates. As a result, all low-income customers in the program have reduced their bills, according to Lisa Rosintoski, the city’s deputy director of utilities.
Rosintoski said a key element of the city’s program was educating customers about the rates and how they affected their bills, including an online bill calculator and cheat sheets showing how much it would cost to run various appliances.
About 65% of Fort Collins customers have seen a reduction in their bills with another 33% having a $1 to $5 increase. The rest had increases of more than $5.
San Diego Gas & Electric is moving all of its 1.2 million residential accounts onto a time-of-use rate as the utility’s default rate, but customers can opt-out and there is a hold-harmless provision, company spokesman Wes Jones said.
After a year, if a customer would have saved more money on traditional rates, the utility offers a credit for the difference. “It’s a good way for customers to have that assurance that they are saving on these plans,” Jones said. Customers who live in desert areas are exempt from the time-of-use rates.
About 60% of residential customers served by Arizona Public Service have adopted a voluntary time-of-use program, according to Leland Snook, the company’s director of rates and strategy. The peak rate is about 24 cents a kWh and the off-peak 10 to 11 cents a kWh.
Households with low electricity consumption – 600 kWh a month or less – can opt for a flat rate of 11 cents a KWh plus a $10 monthly service charge.
Xcel is not proposing time-of-use specific programs for low-income customers, though it does have a low-income bill assistance program and contributes $5 million to EOC, which helped 60,000 Xcel customers with their bills last year.
It also has a special rate for low-income customers with documented medical conditions that need to operate medical devices at home. Other utilities have similar programs.
The PUC is scheduled to hold public hearings on Xcel’s proposal in April in Denver and Grand Junction, and full evidentiary hearings have tentatively been set for June.
“We want to ensure the residential class as a whole would benefit,” said Brooke Trammel, Xcel regional vice president for rates and regulation. “This is a robust process at the commission, and I am sure there will be a dialogue on all the issues.”
Both Energy Outreach Colorado and the consumer counsel have intervened in the case. “We have to do something to manage the peak and if you want to have 20,000 EVs in Colorado you have to have incentives to charge at night,” Schonhaut said. “We just want to be sure the most vulnerable consumers are protected.”
UPDATE: This file was updated at 12:03 p.m. on Feb. 20, 2020, to clarify who qualifies for Fort Collins’ low-income energy assistance program.
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