How to decipher your electric bill in Minnesota

The electricity-sucking summer air-conditioning season is upon us, just as energy costs are soaring.

With that in mind, consumers might be scrutinizing their electricity bills. Yet they'll find some information that seems inscrutable. What follows is a guide for deciphering power bills — particularly for Xcel Energy customers.

With 1.3 million electricity customers in Minnesota, Minneapolis-based Xcel is by far the state's largest power provider.

Be they big or small, though, electricity providers seek a balance on their bills.

"I have seen a lot of different bills from a lot of different utilities, and some are way too detailed, and some have just the minimum," said Adam Heinen, vice president of regulatory services at Dakota Electric and a former utility analyst at the Minnesota Department of Commerce.

First things first

The first line on most electricity bills is a fixed "basic service" charge that doesn't change with usage.

"For the consumer, this is the cost of having electricity in your home," said Carmen Carruthers, outreach director for the Citizens Utility Board of Minnesota, a ratepayer advocacy group. "But it varies significantly."

Xcel Energy charges $8 per month to customers served by overhead power lines; $10 for those with underground lines. The state's other investor-owned utilities — Duluth-based Minnesota Power and Fergus Falls-based Otter Tail Power — have basic charges of $8 and $9.75, respectively.

Dakota Electric's basic charge is $10, low for a retail power cooperative. Dakota, with about 110,000 customers, is the state's only electric co-op whose rates aren't set by its board. Instead, it's regulated by the Minnesota Public Utilities Commission (PUC), which aims to keep a lid on basic service charges.

Farmington-based Dakota is the second largest of Minnesota's 50 power co-ops, which together serve around 700,000 households. Ramsey-based Connexus, the largest with 141,000 customers, has a basic monthly service charge of $13.50.

Most retail power co-ops' service charges are considerably higher than investor-owned utilities' — as much as $30 to $40 per month for some, Carruthers said.

That's because most co-ops are largely rural, and have far fewer customers per power-line mile to cover fixed costs. On the other hand, co-op customers usually get an annual bill credit for profit-sharing.

"Co-op bills generally look simpler," Carruthers said.

Now the largest cost

An "energy" charge is another foundation of any electric bill — and a customer's largest single cost.

It is based on the amount of energy a customer uses multiplied by the price of power, with both measured in kilowatt hours. Power providers usually spell out the equation on your bill; Xcel adds the term "energy charge."

Xcel's bill notes a "summer" energy charge — which lasts from June through September — and a "winter" charge. The summer rate is 1.5 cents per kilowatt hour — or 17 % — higher, because that's when power demand peaks and wholesale prices rise.

Many co-ops have a higher summer rate as well, as does Otter Tail Power.

Paying for power generation

Investor-owned utilities pass their fuel costs (for power generation) directly to consumers, a charge based on electricity consumption. Under state law, fuel costs are not marked up by a utility.

On Xcel's bill, fuel cost charges are labeled as such, while they are part of "energy (or resource) adjustment" charges on bills for Minnesota Power and Otter Tail (which respectively have about 145,000 and 62,000 Minnesota customers).

Co-ops have monthly bill adjustments based on fuel and other variable costs incurred by their power supplier. Minnesota retail co-ops rely on wholesale power co-ops, particularly Maple Grove-based Great River Energy, for electricity generation.

Xcel's fuel charge isn't broken out on its bill, but the company provided details to the Star Tribune.

Costs for coal, natural gas and nuclear fuel made up 35% of Xcel's charge in 2022. Another 43% came from net power purchases in wholesale electricity markets, a cost common cost for utilities.

The remaining 22% of Xcel's fuel charge stems from Minnesota's legislatively mandated Community Solar Garden program, which is aimed at people and organizations that want solar without setting up their own panels.

The solar gardens are developed and owned by independent energy companies. Xcel buys their power and administers the program but makes no profit. Under state law, Xcel bills all residential customers — and most other customers — for the program's costs.

Xcel's bill also has a separate "resource adjustment" line, which captures costs beyond fuel that are contained in PUC-approved "riders" — charges that aren't set out in rates. Xcel doesn't break out riders on its bills, but provided details.

A transmission rider comprises 20% of Xcel's resource adjustment charge; another 20% comes from a Conservation Improvement Program (CIP) rider. By state law, investor-owned utilities must have CIP programs, which fund energy-efficiency initiatives.

About 55% of Xcel's resource adjustment charge is for Minnesota's Renewable Energy Standard, which the Legislature created in 2007. It requires investor-owned utilities to get a portion of power from renewables; they can recover some of those costs through a rider.

Some mandated fees and taxes

Customers of some investor-owned utilities will also see an "affordability" surcharge on their bills. For Xcel, it's a flat 98 cents per month. This charge funds state-mandated programs to help low-income customers defray electricity costs.

Rounding out your electric bill is list of government fees and taxes, usually topped by the state's 6.875 % general sales tax. The state tax, however, doesn't apply from November through April for consumers whose main source of home heating is electricity.

Some utility bills will include small taxes from counties, transit authorities and cities. Many municipalities also have "franchisee fees," which can be flat or based on a percentage of your bill before taxes.

In Minneapolis, residents pay a half-cent sales tax and a 5% franchisee fee. Cities with flat monthly franchise fees usually charge $1.50 to $3.

Cities levy franchise fees on utilities for use of public rights of way, but the charges are passed down to customers. Municipalities are increasingly using franchisee fees as a source of funding: They're usually easier to implement than tax increases.

Some customers will have bill disputes. The PUC's Consumer Affairs Office has received 1,255 electricity billing complaints since 2017. It can be reached by e-mail at consumer.puc@state.mn.us or by phone at 651-296-0406 or 800-657-3782.

For consumers, looking to better understand their electricity bills – and how to reduce them – the Citizens Utility Board of Minnesota can help. Contact Carruthers at carmenc@cubminnesota.org or call 651-300-4701, ext. 2.