Unraveling Your Utility Bills -- Part 3 of 3

 

The Valleyist Papers

A COLLECTION OF ESSAYS

WRITTEN IN FAVOUR OF THE IMPROVEMENT OF STEPHENS VALLEY

Author – William Ray

 

Edition 2. Issue 11.

Unraveling Your Utility Bills – Part 3 of 3

This subject is far more involved and complex than most of what we have offered here. To keep this discussion short and simple, such that you might choose to stay engaged, this subject is offered in three parts.

In the last issues we have discussed how utilities, especially electric utilities, collect their Fixed Costs and we’ve closely examined the mathematics behind NES’s retail rates. We have shown how ineffective and unfair these practices are. This month, we go further down that road to a place where SV residents fully understand this issue.

Is it fair to make customers who consume more energy also shoulder more of the Fixed Cost burden, even though volume of energy consumed has no impact on Fixed Costs? Is it fair for customers who use less than average to skip by and not contribute their pro rata share of costs? The answer seems to depend on one’s perspective. While this rate practice is not equitable, and it certainly does not accurately ask each account to pay the real cost of the electricity they enjoy, nor does it properly collect NES’s Fixed Costs (no less and no more), it is a very common practice across our country. As stated earlier, a lot of this comes from the attraction to simplicity and history. The whole electric power community is wrestling with this issue now, and other utilities should be. Metering technology informs the utilities of the cross-subsidization issues, and that same technology enables the utilities to move to a time differentiated rate/billing system that would bring accuracy to bear, but it is widely resisted by the utilities and the customers alike, and that is a real shame. All too often, utility consumers would rather pay a socialized rate than endure a change.

We are in 2023, yet we are still consuming electric power, and paying for that power, using the same methods that were being used in 1953. The ancient rate practices dramatically impact the way the grid operates and the way we all use electricity. The signal from the utilities, through these good-old simple rates, is that there is an infinite amount of electric power available, and that we need not worry about how much we use and when we use it. But that signal is wrong, and it creates a feedback loop that just keeps making the grid more difficult to manage. Retail rates that have no cost differentiation for time-of-day result in spiraling consumption during peak hours. During those peak hours, utilities like TVA use generation resources that are heavy on greenhouse gas emissions. The more we use, the more we emit greenhouse gases and, in turn, globally, the hotter it gets. This loop goes on and on, and there is no need for it! In fact, the demonstrable need is for customers and utilities to partner in the goal to change our energy consumption patterns such that less non-renewable generation is needed.

If we moved to a real cost-based retail rate environment, several good things would happen. First, the electric power marketplace would become comply with our capitalistic system. No one would be forced to subsidize other accounts, and everyone would pay their fair share of fixed costs. This simple outcome would make the change worthwhile, but, if you hold the view that we should also be reshaping electric power demand to reduce capital costs of generation and reduce carbon contribution to the atmosphere, cost-based rates can deliver on that as well. In 2023, the technology is readily available in the form of smart HVAC thermostats and smart appliances to take the signals delivered by these new rates and dramatically reshape demand while lowering our energy bills. Those small changes would, when multiplied by the millions of customers modifying their usage, reduce the amount of fossil fuel used to generate on-peak power. Improving the ratio of off-peak consumption to on-peak consumption would reduce the need to build new generation and the greenhouse gas production attendant thereto.

As you can see from the last issues of The Valleyist wherein we have discussed this, the subject could easily become a book, so we will stop here. But the point is that socialized electric power rates were a reasonable solution before time-differentiated metering was available, but that is no longer the case. We deserve true cost-based rates in 2023, and all of the improvements attendant thereto.