Fixed Charges On Your Utility Bill
Slow growth in electricity demand is causing utility companies to propose raising their monthly “fixed charges” – the fees we pay to the utility company just for being a customer. The average residential bill has approximately $5-$10 per month of fixed charges. The utility companies are proposing to raise that to about $20 per month. These fixed charges on your utility bill are bad for the economy!
This a problem for several reasons:
- It limits our control as customers over our energy costs in our own homes. If a higher portion is a fixed amount, your actions to conserve and use less energy will have less of an impact on your bill.
- It penalizes those who have already successfully invested in energy efficiency, and raises costs on those customers who use less electricity.
- Weakening the incentive to invest in efficiency isn’t just bad for homeowner’s, it’s also bad for the economy and the environment. Investing in energy efficiency doesn’t just save money – it creates jobs and lower pollution.
Instead of raising fixed charges on your utility bill, utility companies should financially reward people and businesses that are saving energy. If they weaken the incentive to invest in efficiency, customers will pay more money, and over time, waste more energy. Some groups are arguing that fixed charges are necessary in order to avoid a “utility death spiral”. However, that is greatly exaggerated. If sales are essentially flat, then utility companies need to pursue new business models if they want to see growth and profits.
Revenue decoupling, where utility profits are not longer tied to the quantity of energy sales, is an important regulatory foundation that encourages energy efficiency. If rate design changes are needed in addition to decoupling, there are better alternatives to higher fixed charges. Some examples are:
- Demand charges are based on customer’s contribution to the peak demand
- Time of use rates are those that make the usage rate we pay for electricity lower during times of low demand
- Minimum bills apply to small number of customers below a set threshold of usage.
Simply raising fixed charges on your utility bill – bad for the economy!