Electricity billing & rates amid the pandemic: 10 issues to watch and work on

In the midst of a public health crisis and economic shutdown, Americans are being hit with massive changes in nearly every aspect of life and work, including how they use electricity. More people are at home using electricity more frequently and more intensely than usual, and with so many people out of work or already facing high energy costs, fewer are able to keep up with utility bills. Likewise, utilities and utility commissions are grappling with how to respond to the current crisis in their decisions and actions around disconnections, ratemaking, utility spending, and future investments. Given these challenging times, what are consumer and clean energy advocates and power sector experts watching and working on? Here’s a quick roundup based on recent conversations and correspondence with a number of advocates who are experts in the field.

Special thanks to the following individuals for their ideas and contributions: John Howat, National Consumer Law Center; Karl R. Rabago, Rabago Energy; Jim Lazar and Janine Midgen-Ostrander, Regulatory Assistance Project; Diane E. Brown, Arizona PIRG Education Fund; Douglas Jester, 5 Lakes Energy; Dave Reinbolt, Ohio Partners for Affordable Energy; Thad Culley, Vote Solar; Ben Inskeep, EQ Research; Radina Valova, Pace Energy and Climate Center; and Jean Su, Center for Biological Diversity. Note that this is not a group-authored article, but rather an aggregation of points contributed by the people mentioned above. For any questions about who to reach out to for more details on any particular point, please email jeff@resource-media.org and debbie@resource-media.org.

1. Protections for consumers when disconnection bans end

Many utilities across the country are issuing moratoriums on electricity service shutoffs in light of the current economic crisis. However, experience with seasonal bans on disconnections for low-income customers shows that after bans expire, there is a spike in shutoff notices and disconnections. With more customers getting behind on bills during the current economic shutdown, it’s going to be vital for utility commissions, states, and power companies to put strong consumer protections in place as disconnection moratoriums end — and keep them in place for years to come. In the last economic recession, utility bill debt wasn’t bad only in 2008; it was even worse in 2009 and 2010. Ingredients for strong consumer protection include eliminating punitive actions like late fees and carrying charges; providing deferred payment plans that are flexible to adapt to individual household needs; offering debt forgiveness programs for households with low incomes; and expanding bill payment and energy efficiency programs that help lower electric bills in perpetuity.

2. The need for better data on disconnections, energy burdens and bill arrearages

Only a handful of states require that utilities provide monthly (or even quarterly) data on power shut-offs or bill arrearages for residents. It’s a longstanding problem made glaring now in the current economic crisis. Stimulus checks and unemployment benefits will help some affected workers, but delays and lack of access in the face of massive demand will leave a lot of folks falling through the cracks. If there was ever a time for states to fix this problem, it is now. Monthly data for both general residential and lower-income customers is paramount to understanding the full scope of energy affordability challenges, designing programs to address needs, and monitoring their effectiveness. Learn more here about the data that is needed.

3. Federal stimulus

Strapped states won’t be able to cope alone with the growing numbers of households becoming low-income and the increased need for bill assistance and programs like weatherization, energy efficiency, distributed energy systems, and other measures to reduce energy burden over the long run. Federal stimulus must play a part in filling these gaps. In addition to ensuring those in dire need are being reached, it will be important to expand program access to aid more households before they get too far behind on bills. There are also efforts to ensure that emergency COVID-19 packages include a nationwide moratorium on shut-offs for six months after the state of emergency is lifted and accompanying bill forgiveness for low-wealth families during that time to alleviate crippling debt.

4. Monitoring unspent funds for deferred capital investments

With utility construction projects delayed for an extended period in many places, those expenditures of bill-payer funds are on hold. This will be key to keep an eye on in the coming months, as there could be an argument for rate or rider adjustments or repurposing of spending approvals for affordability programs. If spending declines aren’t reflected in rates, it is possible utilities could be over-earning on planned investments, even while underearning on actual COVID-19 costs.

5. Special COVID-19 bill riders popping up in some states

Utilities in at least a handful of states to date — including Wisconsin, Nevada and Texas — have gotten approvals for new riders on electric bills to recover unanticipated costs due to COVID-19. These are mostly costs like contracting, operations, and IT. There will be temptation to label a lot of costs as COVID-related, so regulatory transparency and oversight are essential. Moreover, where trackers and deferred accounting are used, the overall amounts and amortization periods will be critical issues if future events, like a second COVID-19 wave or hurricane recovery costs, have a “pancaking” effect on cost recovery. These riders should be short term and expire once costs are recovered and should be subject to an audit to ensure that the amounts recovered through the rider do not include recurring costs that are covered in base rates.

6. Keeping fixed fees down

High mandatory fixed fees on electricity bills are always punishing for customers who use the least energy — typically those living in smaller homes and on lower incomes. In tough financial times, mandatory fees are especially burdensome, as they limit households’ abilities to control and lower bills. Even now, there are rate cases afoot with proposals for big mandatory fixed charges, such as PEPCO’s proposed fixed fee increase to over $20 a month. As utilities face changes in their revenue streams, it’s going to be critical to keep a sharp watch for proposals like fixed fee hikes. COVID-19 cost riders that are assessed on a per-customer basis will have the same effect as increases in basic service charges. The COVID-19 pandemic is a reason to reduce fixed customer charges, not increase them and compound the burdens experienced by customers.

7. Commercial customers seeking relief from demand charges

Large energy users have been filing requests for relief from monthly “demand charges,” given that many commercial and industrial operations are curtailed due to COVID-19. Demand charges are a fee based on the period during the month when the customer uses the most electricity. For residential customers, these types of charges have been vigorously opposed, as they are difficult to control or predict and don’t necessarily even correlate to utility system costs. New proceedings on demand charges, even for commercial and industrial users, offer opportunities for advocates to push back further on these mandatory charges and push instead for time-varying volumetric rates for large commercial customers if they are in need of relief.

8. Keeping a close eye on decoupling mechanisms

Decoupling mechanisms are typically designed to reduce utility opposition to energy efficiency programs related to reduced sales and have also been applied to other variations in revenues experienced by utilities. But decoupling was not designed for the major reductions in sales that many utilities have experienced as a result of the COVID-19 pandemic, and should not automatically be used as a mechanism to force one class of customers (e.g., commercial) to foot the bill for revenue decreases from another (e.g., residential).

9. Revisiting rate plan choices as people’s living situations change

With major changes in home energy use due to more telecommuting, furloughs and layoffs, an electricity rate plan option that may have worked well before the coronavirus crisis may not work as well now with many family members living at home all day. A good example is Arizona, where many Arizona Public Service customers have signed up for a time-of-use or demand rate plan. With summer air conditioning season fast approaching, regulators and utilities are going to need to be very proactive in ensuring people can easily switch rate plans without being penalized. APS allows customers to switch plans after each billing cycle and has developed a rate comparison tool that holds promise for many of its customers to see the implications of their current plan compared to other options. Due to action by the Arizona Corporation Commission, through pro forma billing, APS customers can now also get a glimpse into their historical electricity use.

10. Pushing utilities to innovate on customer payment methods

Many lower-income customers — including seniors — may not have checking accounts or credit cards and rely on paying their bills at authorized utility dealers, such as a grocery store. Utilities should consider providing more location options for payment to help people limit their exposure to coronavirus. We should be seeing options for people to be able to make a utility payment when receiving a doorstep delivery of groceries or other products, with enhanced communications to help ratepayers know where to turn for assistance, and any fees recovered in general rates.

Many of the issues that are arising as a result of the COVID-19 are not, at heart, brand new — they’re ongoing issues seeing very heightened levels of concern. This roundup to watch and work on deserves similarly heightened attention now from regulators and utilities.