Minnesota regulators approve special off-peak power rates for plug-in vehicle charging

Minnesota utility regulators gave electric vehicles a major jolt Thursday, approving lower electric rates for people who charge plug-in vehicles in their garages at night.

The new rates, which take effect in about two months at Xcel Energy Inc. and two other utilities, could shave 40 percent or more off the already low cost of charging plug-in cars like the Nissan Leaf, Ford C-Max Energi or Chevrolet Volt.

"It is absolutely a step in the right direction," said Tyler Sahnow of Minneapolis, who has been looking for a plug-in rate plan for two electric vehicles owned by him and his wife, Kate. "This is the rumbling of change."

The Minnesota Public Utilities Commission ordered the special EV rates for customers of Xcel, Minnesota Power of Duluth and Otter Tail Power Co. of Fergus Falls. At least five cooperative power companies already offer such rates, which take advantage of cheaper electricity at night.

Electric vehicles make up a tiny fraction of cars on the road — about 3,000 in Minnesota — and just 12 models are available to buy in the state. Otter Tail Power, based in Fergus Falls, said only a dozen of its 61,000 Minnesota customers own plug-in cars, while Xcel, the state's largest utility with 1.2 million customers, estimates that just 2,000 of them drive electric vehicles.

But electric vehicle advocates say that new technology offering longer driving distances between charges is coming in the next couple years, and could change the market dramatically. The cost of running an electric vehicle, or EV, typically equates to paying 40 cents to 50 cents per gallon at the gas station.

Under Minnesota's EV rate policies, the three utilities are authorized to put their marketing muscle into electric sales for plug-ins. Xcel, for example, plans to offer a $25 gift card to electric vehicle owners who also sign up for its renewable-only Windsource program.

"Utilities can now market more electricity consumption through this program because it is actually a good thing," said Jukka Kukkonen, a plug-in vehicle owner who is a principal in PlugInConnect, a Minnesota consulting firm.

A 2014 state law ordered the state's regulated utilities to offer electric vehicle charging programs. Each utility's program is slightly different. All three power companies offered cheap overnight rates on power dedicated solely to charging vehicles. Xcel's program also offers lower weekend rates for EV charging.

Far from Reddy Kilowatt

For years, utilities have been discouraged from promoting the sale of electricity — and that hasn't changed. This program differs from 1950s-era electricity pitches featuring the stick figure Reddy Kilowatt. It aims to shift plug-in vehicle owners' power consumption away from peak periods, like hot summer days when air conditioning demand drives up electricity prices.

Environmental groups argue that electric vehicles, when charged at night, often with wind energy, can cut greenhouse gases in the transportation sector, which accounts for 27 percent of the nation's carbon emissions.

"EVs have potential to provide benefits to the utilities," said Leigh Currie, an attorney for the Minnesota Center for Environmental Advocacy, a St. Paul nonprofit law firm that has pushed clean energy policies. "They provide a potential means of storing renewable energy. They provide [electrical] load when utilities sales are flat or declining. There is real potential."

At Currie's suggestion, the commission ordered Xcel and the other two power companies to take a closer look at whether the EV rate could be dropped even further using all-renewable off-peak energy from sources like new, lower-cost wind farms. For now, EV customers will have the option of subscribing to wind-power through utilities' existing renewable energy programs, such as Xcel's Windsource.

Not even electric vehicle enthusiasts think the program will dramatically change Minnesotans' vehicle choices. Otter Tail, which serves customers in rural areas — and long driving distances — in western Minnesota, projected that at most 100 of its customers will drive EVs in five years.

"We're struggling with the range of electric vehicles," said Dave Prazak, who supervises rates at Otter Tail Power. "People in our particular area — they travel more than the range."

More range on the way?

Kukkonen said many electric cars have a range of about 80 to 85 miles before needing a recharge. The hope is that lower-priced electric vehicles in the next couple years will offer the 200-mile range that luxury Tesla models get today.

For some plug-in vehicle owners, the new Xcel rate presents a financial choice. Kevin McCormick of Eden Prairie said he recently shifted to an all-house off-peak rate also offered by Xcel. That allows him to charge his Ford Focus overnight at bargain rates. To keep his electric bill from rising, his family must shift much of their household power use to off-peak hours.

So far it has worked.

"I am essentially driving my electric vehicle for no driving costs," he said.

If McCormick shifts to EV rates, it requires hiring an electrician to install a second meter. That could cost $300 to $500, said Kukkonen, who believes in some cases it will wipe out the off-peak savings.

David Shaffer • 612-673-7090 Twitter: @ShafferStrib