What is my Electric Rate?
Rate of Return, Return on Investment (ROI), and payback on your solar electric system is based on the cost of a kilowatt hour (kwh) of electricity at your meter. There are two components to the ROI or payback calculation: savings and earnings. Savings are the costs you avoid by using your generated energy to reduce (or eliminate) your monthly usage. Earnings are the revenues generated by the excess energy you sell back to the utility.
To determine your cost of energy, one must first break down the costs on your electric bill into variable and fixed charges. The rate you pay per kwh is very well disguised in your electric bill. The charges listed may be fixed costs or variable costs or a combination of both. A good example is the residential tariff that includes a fixed service charge of $6.25 and a variable cost of about 3 cents per kwh. Also, variable costs are not always based on usage, but may apply to the total electric bill (e.g. taxes and franchise fees).
Although the electric service provider in your area may define the rate acronyms on the back side of your bill, the formula used in the calculation is usually not included. Also, it is not always evident if the charge is fixed or based on your usage. A fixed charge should not be included in the rate calculation. Fixed charges or fees are constant regardless of your usage.
This analysis steps through the line item charges that may appear on your electric bill and determines if the charge is fixed or based on usage. Then an electric rate per kwh is calculated using the variable charges. This rate is the actual “avoided cost” that may be applied to the ROI or payback calculation.
Energy rates are specific to the city or area in which you live because of franchise fees, air quality charges, etc. It also may vary from month to month because utilities now use summer and winter rates, and the commodity adjustment varies with market costs. These variations are explained in each step of the line item charges.
It all begins with the electric rate schedule for your service. Most residential homes are included in the residential general (RG) tariff (see Xcel CRS 1474-NMR). Tariffs for demand metering or business service are not included in this discussion, but may be found at http://www.xcelenergy.com/XLWEB/CDA/0,3080,1-1-1_1875_1802-1397-2_171_256-0,00.html.
The summer general residential tariff is $6.25 plus $.034671 per kwh. The summer tariff applies from June 1 to September 30. The winter general residential tariff is $6.25 plus $.03153 per kwh. The variable (summer) rate used in this final electric rate calculation is 3.4571 cents per kwh.
General Rate Schedule Adjustment (GRSA)
The GRSA adjustment applies to Service and Facility, Demand and Energy charges. It is currently set at 32.5% by the Public Utility Commission. The variable rate applicable to our electric rate calculation is .325 x $.034671 (summer energy rate), or 1.13 cents per kwh.
Air Quality Improvement Rider (AQIR)
The PUC approved this charge to recover costs to reduce emissions from Colorado generation plants. It became effective on January 1, 2007. It does not apply to those customers who voluntarily participate in the Windsource program. If 100% of your energy is from the WindSource program, no charge should appear on your bill. If none of purchased energy is wind energy, the variable rate is .116 cents per kwh. If a portion of energy (100 kwh blocks) is purchased from Windsource, the variable rate applies to the non-wind energy. This analysis uses the non-wind energy rate of 0.116 cents per kwh.
Electric Commodity Adjustment (ECA)
The ECA is adjusted annually by the PUC to recover the cost of energy used to supply electric service. It does not apply to customers that voluntarily participate in the Windsource program. The “ECA factor” is provided in Xcel Rate Schedule CRS 1474-NMR. For a residential general service it is 3.3 cents per kwh. This rate was not consistent in recent billings, and on occasion was slightly lower (2.75) than the ECA factor.
Demand Side Management Cost (DSM)
Demand side management is a program implemented by Xcel to limit demand on the system using voluntary customer reductions. It may include curtailment, load shedding, or other means of keeping system demand low. The DSM rate provided in the Rate Schedule is 0.095 cents per kwh.
Purchased Capacity Cost Adjustment (PCCA)
These costs are related to the costs to contract generation from other utilities and unregulated generators. The rate calculated from recent bills is 1.363 cents per kwh. This charge will vary each month depending upon the availability of area generation.
Windsource Adjustment (WA)
The windsource cost adjustment is applied to those customers electing to use 100 kwh blocks or more of wind energy. A 100 kwh block will incur a charge of $1.47 per month. This fixed charge is not included in the variable rate calculation.
Renewable Energy Standard Adjustment (RESA)
Xcel energy charges 2 percent of the total electric bill (before taxes) to fund the renewable energy program as required by Amendment 37. This charge includes fixed and variable costs. To determine the variable rate portion of this charge, the total electric bill must be calculated including the avoided and excess kwh generated.
Then the variable rate can be determined from the difference of the actual bill and the calculated bill without generation. Since most of the electric bill is based on usage, a good approximation is .2 cents per kwh (based on a kwh cost of 10 cents and 90 percent usage factor).
Franchise Fee (F)
The franchise fee is based on the total bill, and varies by location. The rate calculated from recent billing is 2.912 percent of the total bill before taxes. Using a 90 percent usage factor and 10 cents per kwh, the variable rate is .02621 cents per kwh.
Sales Tax (T)
Sales tax is based on location and the total bill. The tax rate applied in recent bills is 3.485 percent. A 90 percent usage-based factor and 10 cents per kwh approximation yields a variable rate of .03137 cents per kwh.
Total Savings Rate Calculation
The total of all the variable rate charges given above is 9.73(w) and 9.41(s) cents per kwh. Summer months are June to September. This rate may change slightly each month, but provides a good approximation to base payback and ROI calculations. The savings rate includes variable rates that are avoided by reducing energy usage (kwh saved).
Earned Energy Rate
Xcel Energy pays for any accumulated excess energy at the end of each calendar year. Rate department personnel explain this rate will be based on the Residential General Rate at that time (3.153 cents per kwh in December). Hopefully, a commodity adjustment will be added to this rate to make it more representative of the true avoided cost. Sizing a solar generation system to match annual loads is encouraged by this lower rate.