The MN PUC approves new space-heating rates for ASHPs
This March, the MN Public Utilities Commission (PUC) approved Xcel Energy’s revised space-heating rate as part of Xcel Energy’s time-of-use rate docket, for which CEE staff provided analysis and detailed recommendations. To re-evaluate electric space heating rates, Xcel Energy put forward a proposal that would align costs to customers with the benefits that electric space heating provides in a dual fuel system.
These new rates make dual fuel systems, with electric space heating and an efficient gas heating backup, cost-competitive with all natural gas heating and a standard central air conditioning (AC) unit. CEE staff provided crucial analysis and were instrumental in the recommendations included in the final decision options, in addition to coordinating with stakeholders to find a solution that would allow the new space heating rates to be available to consumers faster than the original plan dictated.
The proposed new rates came about as a result of a March 2022 PUC order that required Xcel Energy, based on a CEE recommendation, to adjust its electric space heating rates to more accurately reflect the system benefits of dual fuel air source heat pumps (ASHPs). Using models developed for past research projects, CEE staff evaluated customer bill impacts for the recently proposed rates and found they accomplish this goal by reducing operating costs for customers with ASHPs, making the technology more accessible and enabling adoption.
"ASHPs have the potential to more efficiently heat and cool our homes, but widespread change won't happen if they aren't practical and cost-competitive for most Minnesotans. This rate change paves the way to broader adoption."
Carl Nelson, Senior Director of Market Transformation
This rate change approval is the culmination of extensive research and efforts from CEE’s Market Transformation team and their work building out Minnesota’s Efficient Technology Accelerator (ETA), a statewide market transformation program that accelerates deployment and reduces the cost of emerging and innovative efficient technologies to bring lower energy bills and environmental benefits to all Minnesotans. Obtaining rates for dual fuel ASHPs that reflect the utility system benefits has been a key market transformation strategy for ETA’s ASHP Initiative.
CEE’s recommendations in the filing include proposals for targeted outreach to customers regarding this special electric rate, particularly those that receive rebates through ECO programs. These recommendations include requiring Xcel Energy to facilitate enrollment in the electric space heating rate, incorporate customer education and awareness of the rate, educate implementers of complementary programs, provide educational resources to contractors, and deliver additional ASHP-related resources on system efficiency, rebate eligibility, proper sizing, and switchover temperatures.
The approval of this electric space-heating rate and its speedy delivery to ratepayers will help deliver on the promise of ASHP technology for more Minnesotans and lower carbon emissions across the state. CEE and the ETA staff encourage our partners and communities to spread the word on the new benefits of these space heating rates for dual fuel use!
Visit the MN ASHP Collaborative's website
Minnesota's Efficient Technology Accelerator (ETA) is a partnership funded by the state's investor-owned utilities (IOUs), administered by the Minnesota Department of Commerce, Division of Energy Resources (DER), and implemented by Center for Energy and Environment (CEE).