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2021 Rate Hikes and Sticker Shock

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"The issue is that this doesn't get better with time,” said Rodney Blevins, the CEO of Dominion's utility operations in South Carolina.  The second-largest U.S. power company by market value in the United Staes, Dominion Energy Inc. agreed not to pursue their intended rate hike for some 750,000 customers.  Lawmakers, regulators and utilities all agree that the timing is not ideal for the average American to face a rate increase. But what happens to all those unpaid bills and how will utility costs be recouped?  Typically, utilities write off uncollectible bills, and the costs are recovered from all customers in the form of higher rates.  But things are far from ‘typical’ lately and if Dominion is unable to increase rates at this time, the situation can only worsen.  Dominion says the rate hike would boost its finances and help the utility recover money it invested in its power plants, electric lines and other infrastructure over the past eight years.   The utility agreed to wait six months to address the request again.  Rhonda O'Banion, Dominion's spokeswoman, said they would use the next six months to try to reach a settlement with the state's utility watchdog agency, Office of Regulatory Staff (ORS) and the other groups that opposed the rate hike. "We look forward to continued collaboration with the parties as we seek to find compromises to reach a resolution to this case. We value the input from all customers who took the time to voice their concerns. We will continue to focus on providing the safe, reliable service they depend on.”  

Florida Power & Light (FPL), owned by largest rate-regulated electric utility in the United States, NextEra Energy, proposed a rate hike that was met with a little less opposition.  FPL’s projected rate increases will still keep FPL bills “well below the national average” through 2025.” said, FPL spokesman Christopher McGrath.  Their press release stated, the revenue increases are “necessary to support continued investments that benefit customers as the company builds a more resilient and sustainable energy future for Florida in the face of climate change and strong, frequent severe weather.”  Their immediate costs include moving transmission lines underground to improve reliability during extreme weather and reimbursement for the cost of building 900 megawatts of new solar generation capacity.  Oklahoma may follow suit by pushing for underground electrical distribution systems but customers are reminded that these upgrades cost money and to reach that goal, rate hikes will be necessary.  Last month, the state of Michigan approved Consumers Energy’s substantial rate hike.  “We understand there may be some sticker shock when customers see their bill going up," said Consumers spokeswoman Katie Carey. "In the end, our goal is to provide safe and affordable electricity to the 1.8 million households and businesses we serve.”  But they assured the public, the additional revenue will go toward vegetation management, updating infrastructure and eliminating coal-fueled power. The increase will also replace infrastructure and cover the rising costs of operations, maintenance, financing and environmental responses. In Southeast New Mexico, Xcel Energy is seeking a hefty 9.2% increase for new substations and transmission projects along with the massive Sagamore Wind Project.  According to a study from consumer research firm Ownerly, New Mexico had the third-highest electric bill increase during the pandemic, more than triple the national average.  Vermont had the highest rate increase at 20.8 percent, followed by Michigan at 14.4 percent.  Pennsylvania had a 1.8% increase but nearly a million of the state’s utility customers are past due on their bills because of COVID-19 and many are asking, ‘Who will pick up the bill?’

Rate increases allow utilities to cover the costs of repairs, updates and uncollectible bills.  Timing is everything but how long can utilities wait to recoup costs?  Georgia Power is taking a different approach.  The Smart Usage plan should change consumer behavior to reduce costs for everyone. It charges higher electricity rates for certain peak energy use that puts extra strain on the electricity grid — 2 p.m.-7 p.m., Monday through Friday, in the months of June through September — and much lower-than-normal rates for all other periods. Despite much debate, Georgia Power spokesman John Kraft is confident that those who do make changes “stand to recognize savings, by using large appliances at different times and shifting usage away from summer afternoons.”  Could a change in consumer behavior strike the balance required to maintain profitability in the utility sector?  Or can rate hikes help them break even?

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Bob Meinetz's picture
Bob Meinetz on Jan 15, 2021

Renewables advocates claim renewable energy is now the cheapest option. Then why is it so damn expensive?

Xcel Energy:

"Xcel Energy is seeking a hefty 9.2% increase for transmission projects along with the massive Sagamore Wind Project....New Mexico had the third-highest electric bill increase during the pandemic..."

Florida Power and Light:

"Their press release stated the revenue increases include the cost of building 900 megawatts of new solar generation capacity."

Vermont:

"Vermont [state that claims to generate 99.9% of its electricity from renewable resources] had the highest rate increase at 20.8 percent..."

Matt Chester's picture
Matt Chester on Jan 15, 2021

For the Xcel and FPL snippets, wouldn't it stand to reason that while investing in new infrastructure building that those would be capital-intensive? Doesn't necessarily portend what the long-term trends would be, just that building new requires money-- just as it would for building out new coal or gas or nuclear. 

For Vermont--  I see in 2019 their increase was 1.5% compared with a national average of 0.9%-- higher than average but not by a terribly notable amount. Year over year in October (the last month for which EIA data are available) saw a 1.1% increase in VT compared with an average national increase of 2.4%-- so actually better than average

Matt Chester's picture
Matt Chester on Jan 15, 2021

Ah I'll reply to myself-- this study is looking at average consumer power bill from March to August, not the rates charged by utilities. That's quite different-- and seeing that Spring/Summer 2020 had 20% more cooling degree days (measure of the weather that directly correlates with AC load requirements) than the same period in 2019, this appears to be predominantly tied to weather impacts in VermontToo bad renewables can't make summer temperatures cooler

Bob Meinetz's picture
Bob Meinetz on Jan 16, 2021

Matt, new transmission costs, minus increase in consumer demand, is almost exclusively tied to development of wind and solar power.
Both involve exorbitant costs in new transmission. Why? Because like their land use imprint, they have a huge transmission imprint.

Connecting Diablo Canyon to California's electricity backbone at Midland substation involved adding #12 500-MW AC cables, from a substation near the plant, in 1985. That's all. Adding an equivalent quantity of solar or wind generation requires literally thousands of additional cables and transmission towers - nevermind the costs of acquiring property rights and maintenance.

Vermont rates are already fourth-highest in the continental U.S., next in line after renewables-heavy California. Germany and its Energiewende, this year, achieved the dubious distinction of having the most expensive electricity in the world.

Renewable electricity is how the most affluent people in the world justify, to themselves, their lavish overconsumption of energy, its environmental impact, and its financial impact on the less fortunate among us. Seems rather greedy, doesn't it?

Audra Drazga's picture
Audra Drazga on Jan 18, 2021

Interesting timing for this topic as Biden is proposing that we invest in renewables.  At the same time, many cannot pay their bills.  So how do utilities offset the costs?  I would be interested in hearing from our utility members on what their utilities are doing?  Are there other alternatives to rate increases? 

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