How Xcel’s new idea for electricity rates would change your bill

Xcel Energy will try changing what electricity costs based on the time of day. Here’s what that might look like.

(Kevin J. Beaty/Denverite)

staff photo
An electricity pylon. (Pixabay/Unsplash)

An electricity pylon. (Pixabay/Unsplash)

Xcel Energy just published a huge, complicated plan for the future of its power services in Colorado. One of the most remarkable changes: The company will try changing what electricity costs based on the time of day.

Right now, Xcel’s electricity rates are simple: The rate for residents is always the same, except that it increases if you go over 500 kilowatt hours in a summer month.

The new rates would be highest when the demand for power is highest, differing both by the time of day and the season. Xcel wants to try this new structure as a voluntary pilot program for 10,000 households starting next year, and more after that.

Here are the proposed rates for the test, in cents per kilowatt hour, once you factor in all the various details. For comparison, the typical all-inclusive residential rate right now is about 8.8 cents per kilowatt hour.

Time of day Summer Winter
Peak (2 to 6 p.m.) 18.4 cents 13.5 cents
Shoulder (6 p.m. to 9 p.m., 9 a.m. to 2 p.m.) 13 cents 10 cents
Off-peak (9 p.m. to 9 a.m.) 8.3 cents 8.4 cents

As you can tell, you really get punished for peak usage under this new program, paying about twice the normal rate. (Xcel also wants to test a separate program that would increase your rates if you use a lot of electricity in a short period of time.)

So how does it all add up?

Xcel estimates that peak hours will make up only about 5.5 to 7.5 percent of your typical customer’s bills. When you do all the math, they expect people in the pilot program will be paying about 10.5 cents per kWh.

So, if nothing else changes, a household might pay about 20 percent more under this new method of billing.

Obviously this will put some pressure on people to really limit their power usage during the summer. One way to do that would be to turn off or throttle back the air conditioner in the afternoon.

How would this help?

Xcel wants to reduce the “peak demand” for electricity. By charging higher rates at the busiest times, it may reduce the amount of electricity used during those hours.

If it doesn’t need to produce so much electricity at once, it doesn’t need to run as many power plants. Less power plants, less costs, less environmental impact.