Xcel proposal would give automatic bill credits to households in low-income areas

An initiative proposed by Xcel Energy aims to automatically slash electric bills for people living in energy-burdened areas.

Residents of areas paying the highest proportion of their income on electric bills would automatically receive a monthly bill credit under a pilot program proposed by Xcel to the Minnesota Public Utilities Commission, a governor-appointed body that regulates power providers.

The proposal would cover households in 77 census tracts in Xcel Energy’s coverage area across the state, with a goal of ensuring no household pays more than 4% of its earnings on electric bills.

“If we’re going to do a new pilot in getting energy assistance to people, make it as streamlined or automatic as possible,” said Nick Martin, Xcel’s director of strategic outreach and advocacy.

The plan was hatched by Xcel’s equity stakeholder advisory group, which the PUC ordered the utility to form in 2022. The group included representatives from cities and government agencies, leaders in nonprofits that serve families in need, and energy justice groups.

Many in the group came from organizations that are at times critical of Xcel, but everyone worked together to form a program that could deliver tangible benefits, said Jonathan Palmer, a workgroup member who recently retired from his role as executive director of the Hallie Q. Brown Community Center, an African American social service agency in St. Paul’s Rondo neighborhood.

“The whole idea was looking at how do we impact people who are facing the heaviest cost burden in comparison to their income,” Palmer said.

A unique approach

The two-year pilot program would provide an average annual savings of $450 per household, Martin said, but would vary in amount by area. Xcel used its own data on bills, plus income data from the U.S. Census Bureau to create an energy burden analysis map showing which areas have the highest bills and the lowest incomes. The utility has not announced where those 77 census tracts are located. Xcel is the largest electric provider in Minnesota, mostly serving the Twin Cities metro area and smaller pockets throughout the state.

The percentage of income a household pays for all of its energy costs is known as an energy burden.

The average energy burden in Minnesota is 2%, according to a 2022 Commerce Department report . But low-income households, which are disproportionately people of color in Minnesota , average an 8% energy burden. The Xcel program seeks to address the percentage paid specifically for electricity.

Energy bills are an example of how life can be more expensive for low-income households, with poorer families often living in older, less energy-efficient homes, Martin said. There are likely to be households in those census tracts that earn higher incomes or have more energy efficient homes, but all will automatically receive credits to ensure impact and reduce administrative costs.

The program, estimated to cost about $10 million for the two-year pilot, would be paid for by dollars Xcel receives from the federal Department of Energy related to unresolved conflicts over storing nuclear waste. Xcel says that money represents about one third of what it receives each year from the Department of Energy, funding that it gives back to ratepayers via credits. The program is estimated to have an annual cost to ratepayers of $1.50, according to Bria Shea, Xcel’s vice president of regulatory policy.

The program is believed to be unique nationwide, and Xcel is excited to see its impact, Shea said.

The proposal is being weighed by the PUC, and is currently in an open comment period. Xcel is optimistic the program will be approved by the end of the year and that it will be able to start paying out bill credits in January 2025.

Direct benefits

Federal energy assistance programs offer savings for low-income households, but are historically underutilized, according to Shubha Harris, equitable policy and affordability consultant at the nonprofit Fresh Energy.

Federal energy assistance, typically administered by local Community Action Partnership offices, provides cash relief to eligible households who enroll. Although Minnesota saw increased participation after more cash was injected into the program and eligibility thresholds were lowered during the coronavirus pandemic, only about a quarter of eligible households register each year.

The Minnesota Department of Commerce and Community Action Partnership offices try to make signing up as simple as possible , but energy assistance still requires income documentation and a social security number. Many families who qualify may not be aware of the program, or are simply too busy getting by to sign up.

Harris worked for Xcel Energy on the equity stakeholder advisory group that designed the program, which she believes could serve as an innovative model for direct assistance nationwide. It’s not a mystery where pockets of poverty and high energy burden are, she said, so providing a direct discount is practical.

“Let’s use these mapping tools to ID where there’s large pockets of poverty, and let’s just provide these households with a discount,” Harris said.

While working at the Hallie Q. Brown Center, Palmer frequently encountered families facing high energy bills. Families in need are usually dealing with several issues, not one, Palmer said. Energy bills are a constant need for households living paycheck to paycheck. For those families, it’s all one pot of money, so alleviating any need can help lift people out of poverty, he said.

“If this burden shifts off of a household that is struggling or just working poor, they can move that money to another cost or hopefully just save some money,” he said.

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