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Utility Revenue Decoupling

Aligning With Customers’ Energy Saving Goals

Energy companies like us recover most of our fixed costs through energy use charges. This requires energy companies to maintain or increase sales levels to recover their fixed costs. Revenue decoupling creates a win-win strategy for both energy companies and their customers by breaking the link between electricity sales and revenue.

Why It’s Important

We are committed to promoting energy efficiency. Decoupling helps align the company’s fixed cost recovery requirements with energy savings goals.

With traditional utility rate making, sales drop any time a customer uses less electricity. Decoupling solves this paradox by breaking the link between energy sales and recovery of our fixed costs.

In that manner, decoupling removes the motivation to sell more electricity and allows the company to further promote energy efficiency and conservation, while also maintaining revenue necessary to provide safe and reliable power.

How It Works

With decoupling, instead of linking energy profits to the amount of power sold, profits are linked to the number of customers served. A system of periodic “true ups” or price adjustments reconcile actual revenues to the level regulators determine to be fair and reasonable. The adjustment will result in either a credit or surcharge on customer bills depending on the average use per customer.

About This Filing

Xcel Energy - Colorado has proposed a revenue decoupling adjustment for electric residential and small commercial customers. Large commercial and industrial customers would see no changes from their current price plan. We are requesting Commission approval of the decoupling proposal and the methodology used to calculate the adjustment.

• If average energy use per customer falls, the company would be allowed to recoup its lost revenue. If average energy use per customer increases, the company would refund the excess to customers.
• The proposed methodology accounts for changes in weather normalized usage, so severe weather impacts would not be a factor in the calculations.
• Based on forecasts, we expect this will amount to an approximate 2 percent increase on average residential customers’ bills.
• The proposed initial term is five years (from 2017-2021).

Customer Benefits

• Revenue decoupling helps deliver more options our customers want—even if it means we encourage them to use less of our product.
• With decoupling, energy companies are better able to support increased energy saving offerings, such as distributed generation (like private solar), rate design changes (such as the time-of-use rates), energy efficiency and conversation tools, products and services.
• Because decoupling redefines allowed revenue between rate cases, it can also help limit the frequency of rate cases, lower ratemaking costs and decrease the size of requested rate increases.

Application, Testimony, & Certification of Service

We’re sorry, this content is specific to the state of Colorado. Learn about Utility Revenue Decoupling in your state.

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