Environmental groups want Xcel to use tiered energy pricing

Five environmental organizations on Thursday asked Xcel Energy to change the way it charges people for electricity.

Currently, Xcel charges its residential customers a flat rate per kilowatt hour — whether they are the type of person who conserves, or one who leaves the lights on all the time.

But that doesn't encourage people to save energy, members of the environmental groups say.

They want Xcel to charge a lower rate for the first 350 kilowatt hours, and then charge higher rates if customers reach certain thresholds in their monthly electricity use. Under the proposal, customers who use 350 to 700 kilowatt hours would pay a slightly higher amount for that energy and those who use more would pay a higher rate still.

"This is an opportunity to lower your energy bill in a way that's more beneficial to you [as] a low-use customer than the current flat-rate structure," said Will Nissen, a policy associate for Fresh Energy. "And it's an opportunity to take advantage of the best energy resource we have in Minnesota, which is simply the kilowatt hour you don't use."

Xcel Energy officials say they're still reviewing the proposal.

Besides Fresh Energy, the Minnesota Center for Environmental Advocacy, the Sierra Club, the Natural Resources Defense Council and the Izaak Walton League's Midwest office are making the request.

The Energy CENTS Coalition, which represents low-income energy users, also supports the new rate structure with exceptions made for some low-income customers, such as those who use electricity for space heating or medical equipment.

Nissen said Xcel is already using tiered pricing for its Colorado customers, who used less electricity under the arrangement. He said Minnesota Power customers in northern Minnesota also have tiered pricing.

Some Minnesota CenterPoint Energy customers saw tiered pricing for natural gas rates a few years ago, but the program was scrapped over concerns about fairness.

Xcel is seeking permission from state regulators to increase electricity rates by 4.6 percent this year and by another 5.6 percent in 2015. Xcel officials have said the rate increase is needed to pay for new wind energy and to increase output at the utility's two nuclear plants.

The Minnesota Public Utilities Commission would need to approve the rate increase but isn't expected to act on the proposal until early next year. The Minnesota Department of Commerce said Thursday that the rate increase should be trimmed back by 60 percent because Xcel understated revenue and overstated costs.

"The utility's math does not add up," Commerce Commissioner Mike Rothman said in a news release. "Minnesota consumers can have reliable electricity at reasonable rates by trimming Xcel's request."

Public hearings on the rate increase begin June 23.