PUC & Xcel Energy Announce New Two-Tier Rate Structure

Effective June 1, 2010, Colorado will have a new two-tiered electricity rate structure where residential customers pay more for higher usage during peak summer months and less during other non-peak times. Under the new rate system customers will be charged a lower rate for the first 500 kWh per month consumed and a higher rate for any additional electricity consumption above and beyond that (the exact rates are still being debated, with much consideration as to what price will properly reflect the conservation ideals of the policy). This new policy caters to the belief that “the more you us, the more you pay” and seems more in tune with supply and demand economics on an hour-by-hour basis. Ideally, the new rate change will both promote and reward conservation. The primary target of the policy is to impact consumer use of air-conditioning units in the peak summer months due to their high electrical demand.

However, the rate-change is also multifaceted in the reasons behind its implementation. In addition to encouraging conservation among consumers, the rate-change addresses Xcel Energy’s needs for increased revenue to pay for its new coal-fired plant in Pueblo, Comanche III. In a way this new policy presents an interesting contradiction: promoting conservation and increasing rates to pay for a new plant, which represents increased consumption. Another shortcoming of the policy is that the new rate change applies only to residential customers and not commercial ones. While the policy has its inadequacies I do believe that it is a step in the right direction and will successfully provide residential consumers with direct feedback on consumption. A single policy cannot provide an all-encompassing solution, but can pave the way for continued reform in the future. Baby steps…

"State PUC Approves Xcel’s Two-Tier Rate Structure — Colorado Energy News." Colorado Energy News — The Business, Technology and Politics of Colorado’s Energy Industry. Web. 17 Apr. 2010. .

"Colorado Adopts Tiered Electricity Rates and Graduates from the Energy Policy Stone Age!" Clean Energy Action. Web. 17 Apr. 2010. .