Xcel Energy and solar advocates in Colorado recently reached an agreement on the issue of what constitutes fair rates for utility services on a grid that is increasingly distributed.
The Denver-based utility originally had sought a grid use fee for solar users, but dropped the fee in a settlement agreement with 22 parties. Instead, Xcel will continue to offer net metering and test out a new rate design using time-of-use rates (TOU) for residential customers.
Xcel called the proposed agreement the largest settlement of its kind in Colorado history, involving a record number of intervenors and key energy issues. It now awaits a decision from the Colorado Public Utilities Commission.
Although a majority of stakeholders support the settlement, there are a handful of parties that remain in opposition including the Southwest Energy Efficiency Project.
“This settlement, signed by more than 20 parties, represents a turning point in Colorado’s energy future. It was a massive undertaking and Xcel should be praised for their leadership,” said Sean Gallagher, vice president of state affairs at the Solar Energy Industries Association, one of the signatories to the agreement.
Xcel said that it sees the TOU programs as a way to bring about more efficient use of energy on its system. Rates will be lower when there is less demand on the grid and higher when there is more demand, creating incentive for customers to avoid using electricity when the grid is under strain.
The utility will test TOU rates with a small group of volunteers, with an eye toward eventually making the rates mandatory for all of Xcel’s residential customers in Colorado.
The TOU plan depends upon customers receiving smart meters. The utility will install ‘bridge’ smart meters at the homes of trial volunteers, and hopes to begin rolling out full capability advanced meters to all residential customers beginning in late January 2018 and finishing up in late 2021. Approval to do so awaits a PUC decision in a separate docket.
The TOU trials would begin in January 2017 with up to 20,000 customers and expand to 34,000 customers in 2018, and 48,000 customers in 2019. The trials will include up to 500 low-income customers.
Xcel will study the results of the trials and file a letter with the commission Dec. 2, 2019 that advises whether or not it should continue with the TOU program.
For net metering purposes, it is possible to measure customer consumption and energy production during different times of day when TOU rates are in place, said the settlement filing. So Xcel will modify net metering rates to take into consideration the TOU rates.
For customers who roll over their net metering credits from month to month, the utility will track the customer’s excess energy by that time period that its produced and then credit the bill according to the TOU charges that apply to that time.
For customers who choose to receive an annual credit, the utility has set up a somewhat more complex formula. It will apply any on-peak credits to on-peak costs. But if there is a surplus of on-peak credits, it will apply those to the shoulder period charges, and then the off-peak charges.
In the settlement agreement, the utility proposes three rates for each day: off-peak, shoulder and on-peak. The rates will be different in the summer than in the winter. They range from a low of $0.04440/kWh for both summer and winter off-peak to a high of $0.13814/kWh for summer on-peak.
The agreement also allows for Xcel to set up rate decoupling for residential customers. But it does not specify how that will work and leaves open the possibility of stakeholders putting forward ideas at a later date.
The 89-page agreement also dealt with several other clean energy policy issues. They include:
- A new process for interconnections meant to take advantage of battery storage and its potential for environmental and price benefits. To qualify, batteries must meet certain safety and technical requirements;
- A program whereby the utility would offer 50 MW of solar to residential and small-commercial customers; and
- An expansion of other solar programs that are expected to result in 342 MW of new solar between 2017 and 2019.
Alice Jackson, Xcel’s regional vice president for rates and regulatory affairs in Colorado, said that the agreement allows the utility to meet customer 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 provide affordable and reliable energy to further power the state’s economy.”
By Elisa Wood