Are “subscription plans” for electricity headed your way?
A review of the pilot proposed by APS in Arizona
What if you paid for electricity service like you pay for an “all you can view” subscription to cable TV, with one set bill no matter how much you consume?
This concept — originally floated a couple of years ago by Navigant (now Guidehouse) and Tucson Electric Power (TEP) — drew major concern from consumer, clean energy and energy efficiency advocates, and didn’t go anywhere. Now it’s found new life in the hands of Arizona Public Service (APS). In its current rate case, APS wants approval to pilot test subscription plan billing — an approach that replaces billing based mostly on usage with billing based entirely on a fixed monthly charge.
APS says their proposal (see p. 58) is “to study the customer experience, energy usage behavior patterns, and response/uptake to smart thermostat load management technology in conjunction with a fixed monthly subscription rate offering.” The company’s materials don’t say anything about why they’re promoting a subscription-based billing plan for this learning, as opposed to a time-of-use rate.
In their materials, APS says they would recruit single-family home customers to opt-in to one of two different groups — a group without smart thermostat management and a group with smart thermostats that allow APS to adjust temperature settings plus or minus three degrees (allowing for customer override). Everyone’s bill would be set at a fixed monthly charge that’s based on their historic usage over the last 12 months, with an additional five percent tacked on for the group without utility-controlled thermostats. That charge gets locked in for two years — there’s no true-up after the first year if your usage is less.
For context and a review on how Arizona consumer, efficiency and clean energy advocates are sizing up the APS proposal, we asked Diane E. Brown, Executive Director of the Arizona PIRG Education Fund, for their take:
What’s the broader context at APS right now that surrounds this proposal and the rate case?
Diane E. Brown: APS’ proposed “subscription plan” is coming at a time when the utility is under a lot of scrutiny. APS has been in the spotlight from scathing reports highlighting their failure to help customers understand their increased bills after the last rate hike to a flawed rate comparison tool, which initially pushed consumers to the company’s more expensive demand charge plans. Although APS has backed off from proposing to fund the subscription plan pilot this year, they’re still moving forward on trying to get it approved.
What’s your take on the APS subscription plan pilot?
“With the APS proposed subscription plan, the utility would essentially be moving customers to a 100 percent fixed charge — a dream come true for a power company, but not for ratepayers.”
Diane E. Brown: APS’ proposal is part of a larger ongoing trend around the country of utilities trying to collect more and more of their revenue from fixed charges instead of charges based on how much electricity consumers actually use. With the APS proposed subscription plan, the utility would essentially be moving customers to a 100 percent fixed charge — a dream come true for a power company, but not for ratepayers.
When your bill is fixed every month, no matter how much electricity you use, what’s the motivation to conserve? And when the utility controls your thermostat, what’s the benefit to customers when there’s no true-up at the end of the year if usage went down? Energy waste costs all ratepayers more and therefore energy efficiency and conservation should be encouraged. However, the proposed APS subscription plan doesn’t promote energy efficiency and is an opportunity for the utility to collect even more money from customers that are already burdened with electric rates and bills that are too high.
What’s your reaction to how APS is pitching this subscription pilot, and approaches like utility thermostat control they’re wrapping into it?
Diane E. Brown: After receiving a lot of blowback from customers over the complexity of their bills, APS is stating that their subscription plan approach is a way to help simplify things. However, under budget billing, ratepayers pay the same amount of money each month, but it gets trued up to their actual usage — if consumption is reduced, you see the benefits back in your wallet.
Load shaping and pilot programs with utility thermostat control in order to save households and businesses on their bills — and benefit the system — are good. But a subscription plan with no adjustment if usage goes down is not. It’s inherently self-serving for the power company.
The best way to load shift and shape is with a time-of use-rate, where the rate decreases for off-peak periods. In conjunction with a time-varying rate, the utility can then also experiment with incentives or rewards to customers for allowing utility control of thermostats or water heaters. That way, programs are being tested where the customer benefits financially from load shaping instead of testing a 100 percent fixed charge plan where the utility would benefit financially at the customers’ expense.
