Fixed Charges: The good, the bad and the ugly
Electric utility fixed charge hike proposals and commission decisions — 2018 results and a look at the last four years
Which power companies have pushed for the highest customer charges for residential electricity customers? Where have big increases been allowed? And where have public utilities commissions stood strongest in keeping these mandatory fixed fees down low (where they should be)?
Every year since 2015, at about this time — four years running now — NRDC, National Consumer Law Center, and Vote Solar have dug into the numbers, looking to answer these questions and more as we review the trends of commission decisions on utility proposals to raise monthly customer charges for residential electric bills.
But first things first — what is a “customer” or “fixed” charge? As this video animation reminds us, the customer charge is a mandatory monthly fee that residents must pay regardless of the amount of electricity they use or before they even turn on the light switch. It should only be a very small charge that reflects a home’s individual connection to the grid, the meter to measure use and monthly billing. Utilities are proposing increases in the fixed fees as a way to shore up their revenue at a time when customers are using less power thanks to energy efficiency (customers doing more with less energy), demand response (conserving in response to specific power grid or economic signals), and the rapid growth of rooftop solar. Higher customer charges are regressive — they especially burden lower-income households that use the least energy. They’re also a disincentive to customers seeking to conserve their energy use through energy efficiency or to invest in home solar.
The data shows that proposals to hike these fees continue to proliferate, though 2018 saw more commissions outright rebuking these hikes than the year before. While some breathtakingly high fixed fees were proposed (nearly $50 per month in Florida!), commissioners appear to be finding a sweet spot of around $10 for residential customer charges. Thankfully, that figure corresponds with the basic recipe that gets the customer charge right (as discussed in our year-end roundup last year).
Now onto the details. We’ll start with a look at 2018, and then take a deeper dive into what’s transpired over the last four years.
Some better news overall in 2018 than the year before
If there’s one constant over the years, it’s that fixed charge proposals from utilities don’t stop. In 2018 there were 48 proposals with commission decisions. There were 43 in 2017 and 33 the year before that. It doesn’t look like 2019 will be any different — there are already at least 39 fixed charge hike proposals on commission dockets in 28 states, and more are likely.
Now, let’s turn to some good news from 2018: the rate of proposals that were fully rejected by commissions rebounded last year after a slip in 2017. Last year, commissions fully rejected 38 percent of fixed fee hike proposals, compared to 25 percent in 2017. And nearly half of proposals fully rejected in 2018 were large proposed hikes, including two proposals to more than double the charge and five to triple or more than triple it.
When commissions do approve an increase in the customer charge they rarely allow utilities the full fixed fee hike they propose. In 2018, commissions fully approved only five proposals (11%), two of which kept the fee under $8 a month. On average, the approved fixed charge last year ($10.11) dropped back down after it had ticked up sharply in 2017 (to $11.19).
And here’s one other piece of promising news in the 2018 data: commissions acted to decrease current fixed fees in four different case — including in New York and California where legislation was adopted to reduce fixed fees — the most we’ve seen since we’ve been tracking these decisions. In two instances, commissions cut existing fees by half, to under $10.
Breaking results down by state over the past four years
We’ve tracked a total 158 utility proposals with commission decisions on fixed charges from 2015–2018. Some of these are multiple proposals over the period by the same utilities, and when we collapse those to look at the cumulative results we find that commissions approved an average $1.38 increase that took average customer charges from $9.39 to $10.77 over the four years.
Obviously national averages mask a lot of local variation, so here’s a graphic that provides a sense of how this all looks at the state level:
*** Note that this figure includes all final commission decisions, including fully litigated dockets in which regulators reached an independent decision, as well as in settlements requiring commission approval.
The different colors show the very different average customer charges that state commissions approved for the utilities they regulate. States with vertical lines are those where utilities were both very aggressive in pushing steep fixed fee hikes and where commissions ultimately allowed major increases as well — an average increase of $3 or more. The actual range for these large approved average increases goes from $3 in West Virginia up to $4.80 in Indiana.
Here’s another chart that reveals some of the specific utilities whose steep fixed fee hike proposals and approvals are driving the high averages we see in the map above in states like Arizona, Wisconsin, Indiana, Kentucky, Alaska, Tennessee and North Dakota:
Note that there are a handful of utilities whose names don’t appear on the above chart, but that also bear mention — because of what they tried to get approved. Gulf Power in Florida earns the dishonor of pushing for the single highest fixed charge of all among investor-owned utilities over the last four years. The utility proposed a $48.06 monthly fee for residents in 2017 — a 155 percent hike from its already very steep $18.86/month existing charge. Thankfully, the Florida commission fully rejected Gulf Power’s proposal.
Central Hudson Gas & Electric in New York proposed the next highest fee — $30 a month —followed by Indianapolis Power & Light in Indiana and Westar in Kansas, which both pushed for $27 a month. The Central Hudson and IP&L proposals were rejected in full, and Westar’s was scaled back to $14.50.
In all, in the four-year period from 2015–2018 there were 31 utilities in 18 states that proposed to increase their fixed fees by at least 100 percent. Of these, commissions approved a 40 percent increase on average — resulting in an average $10.65 customer charge.
Results in states where commissions dealt with the most fixed charge proposals
Some state commissions were busier than other with proposals from utilities on fixed charges. Pennsylvania topped the list with 15 separate fixed fee hike proposals that resulted in commission decisions, followed by Michigan with 12. Then there were another six states that saw 6–9 proposals each. Here’s a graphic that looks just at outcomes in these states with the most commission decisions from 2015–2018:
New York obviously stands out for its utilities’ high average existing fee (which was whittled down a bit), but it’s Ohio at the bottom of this chart that really jumps off the page. Utilities in Ohio sought to triple existing fees on average, up to $20.45. No other state in the comparison saw such an aggressive batch of proposals. But the Ohio public utilities commission didn’t buy it, fully denying all but one of the six proposals. In the one case where the Ohio PUC did approve an increase, for Dayton Power & Light, it was to $7 a month.
Wisconsin and Kentucky stand out as well in this graphic, a dubious distinction. Here we see states where utilities were aggressive and commissions approved large hikes. In Wisconsin, the commission approved an average increase of $3.68 for utilities in the state, taking the average fee from $11.15 to $14.83. In Kentucky, utilities were permitted a $3.88 increase on average, moving average fees from $8.50 to $12.38.
Pennsylvania, whose commission weighed in on more fixed charge proposals than any other state, saw four different utilities come back twice each for fixed charge increases over the four years, netting them each some increase every time. Utilities in Pennsylvania provide an example of the strategy noted in the trade press last year of companies slowly ratcheting up customer charges by asking for smaller increases, but coming in more frequently than before, in some cases over consecutive years.
Of the 158 total proposals in our 2015–2018 analysis, 24 were second proposals by the same utility — and about half of these multiple proposals resulted in sizable hikes being approved overall (a $2 or higher total increase). There were also six utilities that made three fee hike attempts each over the four years.
As we’ve seen overall, there’s a mix of good, bad (and yes, some ugly) over the past four years of utility proposals and commission decisions on residential customer charges for electricity. As the map graphic makes pretty clear, at the local level there are some distressingly high fees that take a real toll on those using the least electricity — largely households with the least means. But there are also real bright spots where fees have been kept low, as they should be. With so many new proposals from utilities already in the pipeline for 2019, it’s clear we will be forced to go yet another round on fixed charges.