- What are tiered rates?
In 2010, the Colorado Public Utilities Commission approved tiered rates for Xcel Energy's residential electric customers in Colorado. 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 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.
- How will tiered rates affect my monthly bill?
Depending on how much electricity you use in the summer months, your bill could increase or decrease under tiered rates. The breakeven point for tiered rates is 821 kWh for average monthly use in the summer months. Seventy percent of Xcel customers have an average usage of less than 821 kwh per month for the summer months.
See How Tiered Rates Affect Your Energy Bill
- 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.
- 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 659 kWh per month during the summer months of June through September.
Click to see how your usage compares to other customers' average use during the summer months.
Are tiered rates used in other states? Yes. Utilities in a number of other states have tiered rates.
- Why did the PUC approve tiered rates for Xcel Energy?
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.
- 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.
- 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 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. It also encourages customers to think carefully about energy use.
- 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 Colorado 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.
- What about people who have medical conditions?
In January 2014, the Public Utilities Commission adopted rules that allow low income customers with certain medical conditions or who use medical life-support equipment to pay a summer flat rate for each kilowatt hour rather than the tiered rates. The summer flat rate saves money for qualified customers whose monthly summer electric use is greater than 850 kilowatt hours.
Qualified customers must provide Xcel with a certificate from their doctor stating that they qualify for the flat rate. Additionally, the customer’s household income cannot exceed 250% of the federal poverty guidelines.
Contact Xcel Energy at 1-800-895-4999 for more information about this program.