2021 Rate Hikes and Sticker Shock
Jan 18, 2021
"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 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 States, 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?