Xcel Energy’s Time of Use Pilot in Minnesota Demonstrates the Positive Impact of Early Collaboration

As electric utilities look to make their systems more efficient and meet public policy goals, efforts to send price signals that both reflect the true cost of energy and reduce stress on the grid are becoming increasingly important. However, utility rate design efforts can often be contentious, costly processes for all parties involved. This is especially the case if disagreements among stakeholders must be resolved solely through written comments filed in front of a regulatory commission.

Minnesota’s electric utility stakeholders recently tried something new to help smooth out that process: upfront, productive dialogue among stakeholders before the utility filed its rate design proposal. This effort, which was a collaboration between the e21 Initiative and Xcel Energy, brought together a diverse group of key stakeholders including consumer, environmental, and business advocates, to inform Xcel Energy’s development of a pilot time of use (TOU) rate design in its Minnesota service territory. This blog highlights that process, and the full report is available for download by clicking here.

Stakeholder Process Informs Pilot Design

Beginning in May 2017, e21’s co-facilitators, the Great Plains Institute (GPI) and Center for Energy and Environment (CEE), coordinated with Xcel Energy to solicit outcome and design recommendations from key stakeholders for a TOU and advanced metering infrastructure (AMI) pilot in Minnesota. The process enabled participants to learn from third-party technical experts to gain a shared understanding of the key issues involved, including assistance from Lon Huber, formerly of Strategen Consulting, who also played a key role in designing the pilot project. This process of information sharing equipped the participants to have a robust discussion and helped inform their suggestions to the utility.

While the group did not drive to total consensus on all issues, members came to rough agreement on a set of five suggestions to guide the pilot design and eight questions for the pilot to address:

Stakeholders’ design suggestions:

1. Indemnify low-income customers.
2. Use an “opt-out” approach to enrollment (e.g., selected customers are automatically enrolled, but may opt-out at any time).
3. Provide rates that accurately reflect the costs of energy.
4. Balance precision and practicality for all parties involved.
5. Give customers adequate tools to assess their energy usage.

Suggested questions for the pilot to address:

1. What methods are most effective at shifting customer loads?
2. Which outreach and education methods work best for specific customer segments?
3. What are the ramifications for particular customer segments, including low-income?
4. How might TOU rates support additional demand response programs?
5. How will the TOU pilot impact AMI deployment?
6. What value is provided by different consumer technologies (e.g., smart thermostats vs. smart appliances)?
7. How can other customer interventions (e.g., efficiency programs) be paired with TOU rates?
8. How might TOU rates enable conservation, renewables, and emissions reductions?

Xcel Energy not only actively participated in stakeholder discussions, but designed its time of use rate in direct response to stakeholder input, presenting a draft design at the e21 Forum on September 8, 2017. The stakeholder group met again following the draft pilot proposal to discuss tweaks to the draft rate design and identify key questions and concerns in preparation for an effective dialogue within the formal regulatory process.

A full account of how the pilot addressed the suggested questions and design principles is available in the stakeholder group’s filing submitted by e21 to the Minnesota Public Utilities Commission (MPUC). This document also includes a synthesis of remarks by presenters and attendees during stakeholder meetings and questions raised by stakeholders throughout the process that reflect the need for the pilot to balance precision and practicality, both for the utility and for consumers.

Time of Use Pilot Approved by Utility Commission

The TOU pilot was unanimously approved by the MPUC on May 31, 2018 and will go into effect in 2020 for about 10,000 Xcel Energy customers in two locations in the Twin Cities metropolitan area.

The rate is designed to give customers price signals that encourage them to use less electricity during “peak demand” times and more electricity during “off-peak” demand times. This enables the electric grid to operate more efficiently and to avoid building power plants that exist only to serve peak demand times, which would save utilities and customers money.

One of the notable features of the pilot is that it is “opt-out,” meaning customers are enrolled automatically but may opt-out if it doesn’t work for them. This strategy has been shown to produce better results than the “opt-in” approach, in which customers are invited to sign up to participate in a pilot.

A Model for Future Efforts in Minnesota and Beyond

e21’s Phase I report stated that this new front-end-loaded stakeholder engagement approach is needed in today’s quickly changing environment in order to produce better outcomes and to support utilities’ development of new, innovative service offerings to customers in a timely way. The group recommended collaborative regulatory processes to:

“strengthen the regulatory structure while saving resources, time, and money, minimizing the potential for litigation, and maximizing the potential for universal support of policies that are in the public interest and mutually beneficial to utilities, ratepayers, intervenors, and other stakeholders.”

In a survey of participants involved in the TOU pilot process, of the subset who responded, participants indicated that they:

• have a better understanding of various stakeholders’ interests and general areas of agreement/disagreement as a result of these meetings
• feel better prepared to be an effective participant in the regulatory process as a result of these meetings
• would be interested in participating in this process again for other utility pilot/demonstration projects

Given the success of this collaborative effort on the pilot rate design, we look forward to applying this approach to other innovative utility projects that can benefit customers in Minnesota and beyond.

Acknowledgements:

The e21 Initiative wants to thank Xcel Energy for their leadership and to all of the stakeholders who participated in this collaborative effort. We also thank The McKnight Foundation, Energy Foundation, and the Kaplan Family Foundation for their support of the stakeholder process.

Looking to learn more about Xcel Energy’s Time of Use pilot? Check out this in-depth article from Utility Dive.