Use Less Pay More – Fixed Charges and Energy Efficiency

Posted May 13, 2015

Late last year the Wisconsin PSC approved large increases in fixed charges coupled with decreases in kilowatt-hour rates for residential customers of three Wisconsin utilities (which includes me). The result: the lowest users saw their bills increase while the highest users experienced decreases. These changes are short-sighted (at best) because high fixed charges:

  • Unfairly penalize customers living on a fixed income and customers who have intentionally lowered their energy usage (more on that later).
  • Encourages greater energy consumption with the attendant pollution, health, and climate change side effects.
  • Discourages investments in energy efficiency and renewable energy as the payback times on these investments become less compelling.

I am personally frustrated by these changes as I have intentionally made efficiency investments and behavior changes to lower my energy usage. Over the past 12 months my family of four averaged 53 therms and 187 kWh per month. Under the new rate structure, my electricity bill for an average month is $45 with a whopping 43% of that coming from fixed charges. The average bill for someone using 700 kWh per month (the WI average according to EIA) is $116. A household using 3.7 times the electricity of my household only pays 2.5 times as much for that electricity.

Similar proposals are under consideration in several other states, though Minnesota rejected a utility’s request to raise fixed charges.

Source: Sierra Club

Wisconsin and Connecticut are currently the only states that have passed higher fixed charges, but other states may not be far behind. The industry needs to work on strategies around utility business models and rate design that ensure system reliability and a fair return to shareholders and fairness to ratepayers and responsibility to the environment. In the long-term, raising fixed charges will not meet any of these requirements.

In the meantime, those of us in the energy efficiency and behavior change space will need to creatively emphasize the other benefits of energy efficient equipment and conservation behaviors (comfort, health, safety, reduced maintenance, reduced pollution, long-life, and climate change to name a few) to demonstrate their value to customers in places like my home state where the financial benefit is currently less compelling.