Highs & Lows in Utility Commission Decisions During COVID-19

By Karl R. Rábago, Senior Policy Advisor, Pace Energy and Climate Center

To say that 2020 has been a tough year so far is a gross understatement. In just the first six months alone, COVID-19 and the shuttering of much of the U.S. economy have left nearly four million Americans infected with the virus, 143,000 dead, and half the population out of work. Many households facing extra financial strain due to the pandemic are unable to pay for essential services like energy, water, and internet access. According to an analysis by Vote Solar, the average U.S. household spends about $250 per month on critical utility services. Assuming those who have been unemployed are unable to pay these bills, they found that would result in $26 billion in utility bill arrearages over the first four months of the pandemic.

About 60% of the accumulating arrearage, or $15.6 billion, is energy bill debt. Even before switching on a light, U.S. households are racking up energy debt through fixed fees. Fixed fees are the monthly, mandatory fees that utilities charge their customers regardless of how much energy they use. Last year, investor-owned utilities collected about $15.8 billion in fixed fees from their customers. We’ve been concerned about these fees as they continue to rise each year, contributing to a larger and larger percentage of U.S. households’ energy burdens, and now to their energy debt.

Luckily, most power companies aren’t disconnecting electricity or gas service for customers who are in arrears — at least not yet. And some are offering flexible repayment plans and deferred late fees. But while utilities are seemingly protecting their customers during these exceedingly difficult times, they are also working to keep themselves profitable — oftentimes at the expense of their customers, who could end up footing higher energy bills in the future.

We took a look at what’s been happening at state utility commissions lately to see which ones are working to protect ratepayers from excessive fees, questionable rate schemes and service shutoffs, and which are not. Here’s what we found:

Utilities in Indiana are up to all sorts of shenanigans lately, but fortunately, the Indiana Utility Regulatory Commission (IURC) is keeping things in check. Last summer, before the pandemic hit, Duke Energy Indiana — the largest utility in the state — proposed collecting an additional $395 million per year from its 840,000 customers. With the onset of COVID-19, the utility only slightly lowered its request to $362 million. Ultimately, the IURC slashed the utility’s request by 60 percent, only approving a $146 million increase in rate collections at its June meeting. Plus, commissioners lowered the utility’s authorized return on equity (essentially the profit the utility is allowed to earn each year) from its requested 10.4 percent to 9.7 percent. As if unaware their customers were suffering financially, Duke Energy and nine other electric and gas utilities filed a request with the IURC in May to move forward with a plan to recover lost revenue due to COVID-19 — meaning they were requesting to charge customers for the energy that they didn’t use during the pandemic. Commissioners summarily rejected this proposal, showing they value public welfare above utility shareholder earnings.

A dishonorable mention goes to the Georgia Public Service Commission, which allowed Georgia Power and Atlanta Gas Light to resume power shut-offs starting in July, right in the middle of the summer cooling season and pandemic, when more people are out of work, at home longer, and using more energy. Since the COVID-19 outbreak began, 40 percent of Georgia’s workers — or two out of every five — have filed for unemployment. On top of this, late last year, commissioners allowed Georgia Power to automatically enroll new customers in a demand charge starting in 2021 and increase its residential fixed charge (a charge you pay no matter how much energy you use) from $10 to $14 a month through 2022. All these additional fees for customers are going to a utility whose parent company CEO was the highest-paid utility executive in the nation in 2019, with a compensation package of nearly $29 million.

The California Public Utilities Commission deserves high praise for rejecting a proposal from San Diego Gas & Electric to nearly quadruple the minimum bill charged to its residential customers from $10 to $38 per month, citing concerns that it would impact low-income customers and those who don’t use much energy. Commissioners also rejected a $10-per-month fixed charge on ratepayers’ bills proposed by both San Diego Gas & Electric and Pacific Gas & Electric. The CPUC decision landed in mid-March, even before it was clear just how devastating a toll COVID-19 would take on Californians.

Arizona Public Service (APS), the state’s largest utility, serving one million customers, has been in a bit of hot water with the Arizona Corporation Commission (ACC) lately — and for good reason. A recent independent study commissioned by the ACC found that APS failed to adequately educate its customers about its complicated rate plans. Plus, a separate independent audit last year found that the utility earned a 10.45 percent return on equity last year when it was only authorized to earn 10 percent, meaning APS pocketed $77 million more than expected. Vowing there needs to be “some sort of recourse” for APS customers, commissioners are considering opening a legal proceeding to take a closer look at APS’s rate structure. We are watching this commission closely to see what happens next.

In February, just before the brunt of the pandemic hit, the Colorado Public Utility Commission put a halt to automatic increases in customer charges between rate cases for the state’s largest utility, Public Service Company of Colorado (Xcel Energy).

In June, the New York Public Service Commission began studying how COVID-19 was impacting all of the state’s utilities, including energy providers, with an eye toward assessing the financial impacts on both customers and the companies that serve them. It remains to be seen how this proceeding will shake out, but we are hopeful commissioners will put ratepayer needs first.

We give state utility commissions as a whole a marginally passing grade for protecting ratepayers from service disconnections. About half of commissions (AL, AR, CA, CT, IA, IL, KS, KY, MA, ME, MS, NC, NH, NM, NV, OH, RI, SC, TX, TN, VA, WI and WV) have issued orders suspending disconnections either temporarily or indefinitely due to COVID-19. Additionally, three states (AK, VT and DC) had disconnections suspended through legislation, and in Montana by direct order from the governor.

Overall, the first half of 2020 has seen mostly good decisions from utility commissioners. We hope this continues as the year progresses and we begin to rebuild our economy and recover from the COVID-19 crisis.