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Is it time to look at new RPU electric rate structure?

May 3, 2019 GMT

Results of a rate structure survey indicate Rochester Public Utility customers may be open to being charged for electricity based on when it’s used.

The city-owned utility currently charges for the amount of energy consumed, based on a flat rate.

A “time-of-use” rate would charge more during peak hours and less when demand drops off.

“Most people don’t realize the standard rate is probably costing them more money,” said Michael Vigeant, the CEO of Great Blue Research, which conducted the survey for RPU.

The survey conducted in late February and early March found 89 percent of the 1,250 participants preferred being charged a flat rate. At the same time, approximately 65 percent cited interest in the time-of-use approach.

Tiered rates, based on amounts of energy used, saw less interest.

Vigeant told members of Rochester’s Public Utility Board that the findings indicate the potential for offering customers options between at least two rate structures.

However, an overall 87.7 percent approval rating for current operations, which matches findings from a similar 2015 survey, shows RPU has time to make changes and educate its customers.

Vigeant said that will be key.

“Everywhere where we’ve seen a time-of-use rate be successful, there were two key components,” he said. “The first was education; letting folks know what it meant.”

The second component was letting customers see the potential for savings. The potential could be demonstrated by running bills through the alternate rate structure, which could provide savings for running dishwashers and other appliances later in the day.

While the option is being discussed, the utility is not currently equipped to charge fluctuating rates based on the time of day. New meters would need to be installed in homes to make the system work.

Mark Kotschevar, RPU’s general manager, said that will be a question for the utility board to consider in the future.

Part of that discussion will be making sure the potential savings is seen on both sides of the customer’s bill.

“We can’t give them savings without an associated savings to RPU, because we have an overall annual revenue requirement we have to meet,” he said, citing the desire to translate a change in customer practices to a reduction in the wholesale cost of energy.

The city is operating under a contract with Southern Minnesota Municipal Power Agency through 2030, which dictates the cost of electricity and limits the potential benefits for offering a time-of-use rate, but Public Utility Board members suggested discussions should start before the contract runs out.

“We want to be a good way toward a solution in 2030,” said Michael Wojcik, the Rochester City Council member assigned to serve on the utility board.

Kotschevar suggested increasing use of electrical vehicles could also spur benefits for some customers and RPU, noting they will be purchasing electricity that goes beyond the RPU’s current contract.

“We’ll start seeing that before 2030,” utility board member Melissa Graner Johnson noted.

The Great Blue survey results indicated nearly a third of RPU’s customers are considering the eventual purchase of an electric vehicle, with 19.3 percent of customers between the ages of 25 and 34 thinking about that purchase in the next five years.

The survey came with an approximate 2.7 percent margin of error.

Utility Board President Brian Morgan suggested it all works to make it a good time for thinking about the next steps.

“If you consider a wide-scale implementation of smart meters, which are necessary to go to time-of-use rate industrywide, you are probably on a two- to three-year track, if we decided today to do it,” he said. “We’re getting there. It’s not as far off as it looks.”