They’re Ba-ack… But Fixed Fee Hikes Still Getting Nixed

Like a batter who loves to swing for the fences no matter what, power companies keep swinging for big increases in mandatory fixed fees on electricity customers—and mostly keep striking out.

Last year, state utilities commissions rejected or scaled back 85% of the more than 30 proposals from investor-owned utilities to hike the fees consumers must pay each month no matter how much (or how little) electricity they use. It was largely the same story in 2015. And not yet two months into 2017 we’re already seeing fixed fee hikes proposed by utilities in Ohio, Florida, Wisconsin, and Washington. Cue the Poltergeist soundtrack. 

So what to make of this continual push by utilities for higher fixed charges? Are power companies succeeding in significantly driving up fees even if they mostly aren’t seeing their proposals fully approved? A little data analysis can shed some light. Looking at the 34 residential fixed charge proposals from investor-owned utilities in 2015 and the 33 proposals in 2016, here’s what we find:

The reject-or-dial-back trend continues

The last two years have been notable for the actions of prudent, forward-thinking utility commissioners on this issue. The vast majority of proposed fixed charge hikes by investor-owned utilities were either rejected flat-out by regulators or scaled back. Rejection rates have remained fairly steady over 2015 and 2016, with 85% of fixed fee increases rejected or scaled back in 2016 and 91% disallowed or dialed back the year prior.

(Note: In our end-of-2015 blog summarizing fixed charge cases, we cited a Consumers’ Union report estimating that nearly three-quarters of the orders issued between September 2014 and November 2015 either rejected outright higher fixed fees or modified them to be smaller, incremental increases. In contrast, both the 2015 and 2016 figures cited in this new blog cover the full January to December calendar years.)

A slightly higher number were fully rejected in 2015 (50%) compared to 2016 (39%), but as we’ll see in a minute, utility proposals weren’t as sky-high last year and ultimately commissions acted in both years to keep a pretty tight lid on average fixed fees.

Commissions have kept average monthly fees in the $10 per month range

Existing fixed charges at utilities that sought increases in the past two years averaged $9.25 in 2015 and $9.15 in 2016. And regulators have remained pretty steadfast about not letting those averages creep by much. In 2016, the average residential fixed charge approved by commissions was $10.19 per month. In 2015, it was $10.46.

Here’s one notable difference from last year though: in 2016 there were actually two cases in which commissions acted to reduce utilities’ monthly residential fixed charge below their existing rate—and one case in which a utility proposed a fixed charge decrease and the approved fee was lowered even further. What kind of final approved fixed charges are we talking about in these three cases? $9.67 per month at United Illuminating Company in Connecticut (an early test case of 2015 state legislation capping residential fixed charges), $6.56 at Liberty Utilities in California, and $5.39 at Public Service Company of Colorado.

Utilities in 2016 started to scale back their own ambitions

If power companies did get one message from the 91% rate of rejection or scale-back for their fixed charge proposals in 2015, it may have been to try toning down their initial asks. While proposals in 2015 asked for an average increase of 82% over existing fees, last year that dropped to an average proposed increase of 54%.

Interestingly this approach made little difference on the ultimate outcome. As we saw earlier, the bottom line is that regulators stood firm on keeping average fees to just about $10 per month, regardless of where utilities started with their proposals. That looks like a message that’s getting hard to miss.

So what’s ahead for 2017?

Let’s hope that two straight years of near-complete rejections of mandatory fixed charge hikes continue to reverberate across the power sector. From every vantage point—equity, energy conservation, customer control of their energy bills, the ability for people to invest in distributed solar—it makes little sense to saddle homeowners and businesses with bigger fees before they even turn on the lights.

Similarly, demand charges are facing hurdles with regulators (these charges tie a portion of the bill to the one period in a month—typically 15-minute or one-hour—when they use the most electricity). While these charges are common for industrial and commercial customers, they are not typically applied to residential customers. In fact, the North Carolina Clean Energy Tech Center released a report of rate design trends in 2016, and noted that while demand charges received a lot of attention last year and were proposed by investor-owned utilities in several states, they found an “unreceptive audience” among regulators. Such requests were either rejected by regulators, or withdrawn by utilities every time.

These trends illustrate the growing pains of the energy marketplace as the industry moves toward more customer choice and more distributed and clean energy resources. But rather than responding with proposal after proposal that reaches into consumers’ wallets for an answer, we challenge the power sector to take note of these cues from regulators in rejecting mandatory fee proposals—and from consumer, environmental, and renewable energy advocates as we push for more innovative solutions.

Let’s work together to design utility models that prioritize serving consumers’ needs and expanding access to the kinds of clean, renewable energy that people are demanding.