Fixed charges: Going down?

Fixed charges on your monthly utility bill are a flat fee you must pay, regardless of how much energy you consume. Many utilities have asked regulators to increase fixed charges as a way to cover their infrastructure costs in an era of declining energy use across the economy. Often, utilities falsely claim they need these charges because solar homeowners are “free riding” on the system. The end result of high fixed charges is that no matter how much you lower your consumption with conservation or solar, you will still have a high electric bill. A recent Utility Dive article finds that over the last few years, many regulators are refusing utility requests to create or raise fixed fees for ratepayers. More recently, commissions in three states – Colorado, New York and Connecticut – have actually decreased existing fixed fees.

The three cases differ from one another, as they occurred within varying economic and regulatory contexts. These represent only three decisions among the 148 solar policy actions that took place in the second quarter of the 2018 fiscal year alone. The North Carolina Clean Energy Technology Center (NCCETC) tracks these in its quarterly 50-state report. The NCCETC cited “regulators approving residential fixed charge reductions” as one of the three major trends in solar policy for this time period.

Autumn Proudlove, senior manager of policy research at NCCETC, pointed out that the common thread for all three cases is the presence in each of “very engaged advocates and stakeholders,” who played a substantial part in these decisions. In other words, utilities only get their way if ratepayers are not paying attention.

“States with more ‘progressive’ energy policies are likely to have a greater advocacy presence,” Proudlove said. “I think the same thing is possible in more ‘conservative’ states as long as there are groups out there making the case for lower fixed charges.”

In Colorado, not only did its Public Utilities Commission (CPUC) reject the original request of Black Hills Energy (BHE) for a fixed charge increase (from $16.50 per month to $20.13 per month), they recommended lowering it nearly in half, to $8.77 per month. In that case, the CPUC was apparently swayed by the arguments of local advocates, specifically the claim that high fees discriminate against low-and-middle income (LMI) households, and particularly by their contention that such fees discourage energy conservation and thus undermine state policy. The CPUC made its decision in the context of the ongoing energy controversy in the City of Pueblo. The city is considering whether to municipalize its utility by terminating its contract with BHE, as we described earlier this year.

In New York, the utility Central Hudson will see its fee decrease from $24.00 per month to $19.50 per month by 2021. The New York Public Service Commission approved the decrease for reasons similar to the Colorado case. Advocates demonstrated that the high existing fee was hurting low- and moderate-income households. Furthermore, regulators determined that it was at cross-purposes with state clean energy goals.

“I think that these decisions do show a sensitivity to stakeholders’ concerns,” Proudlove said. “In the Colorado case, regulators specifically referenced stakeholders’ argument that high fixed charges negatively affect public policy goals of increasing energy efficiency and conservation and minimizing [the] burden on low-income customers. In the New York case, the fixed charge was reduced as part of an approved settlement agreement, which shows some deference to what stakeholders agree to.”

In Connecticut, a rate case involving the utility Eversource resulted in a settlement in which its fixed charge was lowered by the Public Utilities Regulatory Authority (PURA) by more than 50 percent, from $19.25 per month to $9.21 per month. This change came about because advocates had the state legislature approve a new definition of what fixed charges should be. PURA decided that the existing fee was too high, according to the way that the new law defined such charges.

Proudlove cautions that each state’s commission is different, so a decision in one or two states may have only limited impact on the others. But she believes that the rulings described above may encourage advocates to abandon the defensive tactic of merely arguing against proposed fee increases and “go on the offense” to recommend fee reductions.