DENVER -- Xcel Energy has withdrawn a proposal for a surcharge on Colorado homes and small businesses with solar panels.

Xcel, the state's largest electricity supplier, initially said it wanted to charge solar-equipped customers to help pay the cost of distribution and transmission lines to their homes and businesses.

"We made this proposal in good faith as a reasonable approach to provide for a fair allocation of costs and benefits between customers with solar panels and customers without solar panels," said Karen Hyde, vice president, rates and regulatory affairs for Xcel Energy in Colorado. "However, we appreciate that the proposed rate mechanism has caused significant customer confusion."

The utility told state regulators it was dropping the plan.

Gov. Bill Ritter welcomed the move, saying the fee would have been a step backward and would have threatened jobs in the solar-energy industry.

"We appreciate Xcel's concerns about the cost of distributing power and maintaining the electric grid, and we will work with Xcel to study these issues moving forward," said Gov. Bill Ritter. "The New Energy Economy has become a key bright spot in the state’s overall economy. We must do all we can to encourage growth as we lead Colorado toward a new energy future."

The Colorado Public Utilities Commission had scheduled a hearing on the proposal for Wednesday.