Fuel Cost Charge - Minnesota Electric Customers

Separate Fuel and Energy Charges

In the past, because fuel costs were relatively lower and more stable, most fuel costs were included in the Energy Charge. In addition to this Energy Charge, bills included a monthly Fuel Cost Adjustment (FCA).  This FCA was the typically small difference between actual costs and the fuel cost included in the Energy Charge.

Recently, however, fuel costs have become a higher percentage of total electric costs and have become more variable.  To show this, separate fuel and energy charges will appear on your bill, beginning with new electric rates effective Feb. 1, 2007.

Fuel Cost “Charge” Replaces Fuel Cost “Adjustment”

In the new rates, all fuel costs are separated from the Energy Charge. A new line item, the total Fuel Cost Charge (FCC), replaces the Fuel Cost Adjustment line on your bill. The new total FCC recovers “total” fuel costs. The Energy Charge will be lower as a result, because it no longer includes any fuel costs.

This table shows the Fuel Cost Charges by class category for the previous and current month:

*The Fuel Cost Charge (FCC) is prorated by billing cycle using the calendar month factors shown. A monthly prorate schedule is available on request.

**Off-Peak hours are 9 p.m. to 9 a.m. weekdays, weekends and federally observed holidays.

Customer Class Fuel Cost Charges

Fuel costs, which include purchased power costs, vary by hour throughout the year.  And because each customer class has a different hourly load profile, there is a slight difference in average fuel costs for each, which is represented by a different FCC for each customer class. 

Time of Day Customers

For Time of Day customers, the class average Fuel Cost Charge is further divided into on-peak and off-peak charges, to more accurately represent time of day differences in fuel costs.

Monthly Fuel Cost Charges

The fuel cost charge is designed to recover the costs of fuel used to generate electricity, the cost of energy purchased on the wholesale electricity market and other fuel related expenses. These fuel costs are simply passed through to customers. Xcel Energy does not make a profit on them. The fuel cost charge changes monthly, as the cost of fuel and purchased energy fluctuates throughout the year.

Fuel Cost Charge Better Reflects Cost of Fuel Consumption

The monthly Fuel Cost Charge reflects the expected, or forecasted, costs of providing electricity in a given month. By using forecasted costs, the monthly Fuel Cost Charge means your bill closely reflects the actual cost of the energy use for that month. This allows you to make more informed choices regarding your energy use.  To ensure complete accuracy, the forecasted costs are trued-up with actual costs in a subsequent month.

Fuel Cost Charge is Pro-rated

If your billing period spans parts of two calendar months, which is usually the case, the Fuel Cost Charge will be pro-rated to match this period. The billed Fuel Cost Charge is based on the number of billed days in each month and the effective monthly charges.

For example: A customer’s meter is read on June 5 and again on July 5.

• The Fuel Cost Charge changes on the first day of each month.
• The customer is billed the June Fuel Cost Charge for 26 days and the July Fuel Cost Charge for four days

Each month, the Minnesota Department of Commerce monitors Xcel Energy’s Minnesota fuel clause adjustment. The Minnesota Public Utilities Commission thoroughly reviews it each year.

Trends in fuels and purchased power, and how they affect the FCC

• An electricity price, like other commodities, is based on supply and demand. When the demand for electricity is high, the price for purchasing power also increases. This causes the FCC to be higher in the months of July through September.
• To minimize the costs of purchased power, power plant maintenance is performed at times when the demand for electricity is expected to be low.
• If an outage occurred at a time when electricity use is high, our fuel expenses tend to increase and the corresponding fuel cost adjustment would likely be higher.
• Increased demand for electricity increases the cost to generate and purchase power to meet customer needs.
• When winter use is at it highest, and the weather is coldest, there is an increased need for oil and gas. This increases the likelihood that electricity may be purchased, and directly affects the FCC.
• When weather is much warmer than normal and the demand for summer electricity to cool increases, the FCC will also increase.
• Weather also plays a significant role in hydro plant output and wind generation. Water level can affect how much energy a hydro plant can generate. Similarly, wind output varies according the wind speed.
• Thunderstorms in the summer and winter ice storms can damage our transmission system and disrupt energy delivery. This can impact the FCC.
• Xcel Energy’s fuel cost forecast is based on normal weather. When weather deviates substantially from normal there is a direct impacts on the FCC.

Environmental Improvement Rider – Changes Jan. 1 on provisional basis

Xcel Energy implemented the $1 billion Metro Emissions Reduction Project to increase the amount of electricity and significantly reduce emissions at three metro coal-fired power plants: King, in Oak Park Heights, High Bridge in St. Paul and Riverside in Minneapolis.

The “Environmental Improvement Rider” (EIR) on your bill allows Xcel Energy to recover construction costs. The EIR goes into effect each year on Jan.1 on a provisional basis. The EIR is trued up and adjusted annually through 2009, when Riverside plant is put in service, or until the company’s next general electric rate case.

The current factors are subject to revision pursuant to the Commission’s final analysis.

Resource Adjustment

The Resource Adjustment reflects energy initiative expenses and is shown as a line item on your bill. This includes the following five riders, which the MPUC reviews annually.