Xcel Energy will drop a proposal to add a grid-use charge to customers’ bills in favor of two pilot programs that adjust electricity rates higher during periods of peak demand or boost rates when customers usage surges.

Xcel Energy and 22 parties late Monday filed a settlement involving three different cases the state’s largest utility had before the Public Utilities Commission. Hearings on the settlement are expected to be held in October.

“The settlement provides a pathway for the PUC to consider time-of-use rates for all customers in the future. It preserves customers’ ability to manage their bills without a grid-use charge,” said Gwen Farnsworth, a senior energy policy adviser with Western Resource Advocates, one of the 26 parties involved in the discussion.

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August 26, 2020 Xcel Energy proposes lower rates for new, expanding businesses as economic boost Xcel Energy had proposed shifting more costs into a new grid-use charge while lowering the price of each kilowatt consumed.

Environmental groups feared the grid charge would create an incentive for consumption over conservation. Solar advocates argued that model would penalize those who generated their own electricity and reduce residential solar installations. Large commercial users protested that the proposal shifted more costs in their direction.

Instead of locking more costs into a fixed charge, Xcel Energy will test two different pricing models for residential customers starting next year. The PUC will make the final call in 2020 on whether the programs should be adopted for all 1.2 million of the company’s residential customers.

The time-of-use pilot has two seasons — summer and winter —- and three rate periods during each day, peak, shoulder and off-peak. Residential rates during the peak period, which runs from 2 to 6 p.m. on weekdays, would reach as high as 13.8 cents per kilowatt hour in the summer months and 8.9 cents in winter.

Electric use during the shoulder periods, from 9 a.m. to 2 p.m. and from 6 to 9 p.m., would run 8.4 cents per kwh in summer and 5.4 cents in winter. During the off-shoulder period, from 9 p.m. to 9 a.m., they would run 4.4 cents per kwh during winter and summer.

The second program charges higher rates when large amounts of power are consumed in a short period — turn on all the lights in the house, and run all the appliances at the same time and the price of electricity increases, even if it is at 2 a.m.

The settlement targets getting 10,000 residential customers to volunteer for each of the programs in 2017, with a goal of 18,000 by 2019. Each program requires meter upgrades for participants.

The settlement is a big win for solar generators in that it preserves net metering, or their ability to receive a credit for the electricity they put back on the grid. They will also benefit if time-of-use charges are adopted, because solar arrays would generate the most energy during the periods when electricity charges are highest — on hot summer afternoons.

“Instead of the damaging fixed charges initially proposed for everyone’s bills, we endorsed a move toward progressive electricity rates. These rates will reward residents and businesses who choose to go solar by putting a proper value on electricity produced when it is most valuable,” said Rebecca Cantwell, executive director of the Colorado Solar Energy Industries Association, in a statement.

The settlement also boosts options for low-income households to obtain solar, lifts Xcel Energy’s allocation to solar under its renewable energy plan and will study the issue of using battery systems to store excess solar power.

“We are encouraged by this settlement, which shows the value of parties coming together, listening to consumers, and agreeing to test rate structures that promote consumer choice,” Lauren Randall, senior manager of public policy for Sunrun, a solar energy equipment provider, said in a statement.

The settlement agreement spans 89 pages and bridges three separate cases Xcel Energy had before the PUC. Environmental advocates, solar supporters, several large commercial users and the cities of Boulder and Denver all participated in the settlement discussions, which headed off what could have been months of legal wrangling.

Alice Jackson, Xcel’s regional vice president for rates and regulatory affairs, said in a statement that the agreement will “allow us to meet our customers’ expectations by giving them more control over their energy choices. It will bring more renewable and carbon-free energy to Colorado through the use of new technologies, and it will be provide affordable and reliable energy to further power the state’s economy.”