Customer Support

Utility Revenue Decoupling

What is revenue decoupling?

Decoupling breaks the link between a utility’s energy sales and the revenue collected from its customers. Doing so helps align the utility with customer energy savings goals, by allowing for reasonable cost recovery for the utility while maintaining customer rewards for using less electricity through energy conservation efforts.

How it Works

The majority of costs recovered through utility base rates (the non-fuel amount you pay for electricity) don’t vary with the amount of energy consumed. However, base rates are structured in such a way that revenues for a utility, like Xcel Energy, rise and fall with total energy consumption.

This commodity-based relationship creates a natural disincentive for a utility company to invest in energy efficiency programs that reduce the amount of electricity sold. The purpose of revenue decoupling is to eliminate this. As a result, we will no longer lose revenue by helping customers reduce their electricity use and conserve energy.

Revenue Decoupling Adjustments: Example-Residential:
Description Avg Rates
$/kWh**

Year 1
Usage:
750/month



Year 2

 with Decoupling

Year 2

with Decoupling

Uses 5% less**

Monthly Bill Impact
(a) (b) (c) (d) (e) (f=e-c)
Energy Usage   750 750 713 (38)
Customer Charge 8.00   8.00  8.00 8.00  -
Energy Charge 0.096343  72.26  72.26 68.64  (3.61)
Fuel Cost Charge  0.025345 19.01 19.01  18.06  (0.95)
Riders    6.18 6.18  5.92 (0.26)
Decoupling Adjustment 0.003064  - 2.30 2.18  2.18
Total Bill   105.44 107.74 102.80 (2.64)

*The decoupling adjustment reflects a decoupling surcharge due to a deficit in energy revenues from the previous rate period (year 1).

  • If overall energy use is lower, the Decoupling Adjustment will reflect a surcharge that recovers the revenue shortfall.

  • If overall energy use is higher, the Decoupling Adjustment will reflect an excess revenues credit to customers.

**When a customer is more energy efficient and uses less energy, they see the cost savings despite the Decoupling Adjustment surcharge.

Pilot Program Started January 2016

 

The four-year pilot program allows Xcel Energy to adjust its rates up or down for residential and small business customers once a year to make up for any shortfall or correct for excess in non-fuel revenue.

The 2016 calendar year was the first year of our pilot program and the  decoupling adjustment for 2016  appeared as a line item on October 2017 customer bills through March 2018. The decoupling adjustment for 2017 will appear as a line item on customer bills in April 2018 through March 2019.

Additional Resources

2018 MN Electric Decoupling Onsert
MN Decoupling FAQ
MN Decoupling Overview/Info Sheet

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