SnoPUD has become the latest utility to consider the siren song of increased fixed charges to its residential customers as a reflex to the success of its energy efficiency programs and flattening demand. A utility Board of Commissioners meeting on June 21st heard a staff presentation on the issue. The arguments in favor of increasing a residential customer’s fixed service fee (and consequentially lowering the utility’s kWh rate) were time honored. The triggering concern is a forecast of insufficient revenue due to the potential of declining volumetric sales. Following close behind are concerns with regard to customer equity and cross subsidy. The utility Board has not yet acted on this issue.
We hope that this provides the Commissioners the opportunity to download and read the excellent discussion of utility rate design available from the Regulatory Assistance Project (Smart Rate Design for a Smart Future, Lazar, J. and Gonzalez, W.). The following is from page 19 of this report.
Inescapably, a public utilities revenue requirements are just that. In aggregate, the “bill” they send their customers must equal the total cost of their operations, energy costs, and debt service. As the RAP publication clearly illustrates, the long term health of the utility and its revenue requirements are not served by high fixed rates charges. They result in very poor consumer signals for energy efficiency and do nothing to control the long term revenue requirements of the utility.