Potomac Edison customers are already familiar with the flat $5.00/month "customer fee" they are paying for fixed cost services such as distribution line maintenance, a customer care center to cheerfully answer their billing questions, and a staff of meter readers who will come to their home every 2 months to read their electric meters. Potomac Edison has been collecting this $5 fee from every customer, every month, although the company has completely failed to actually provide the services, and has instead been pocketing the money to add a few pennies to the stockholder dividend.
Now the investor owned utilities and their trade association, Edison Electric Institute (EEI), have cooked up a new way to increase your monthly "customer fee," or to put in place huge new fees for new or departing customers.
A report issued by EEI back in January recognizes an emerging threat to the electric utility business model that will ultimately be its undoing. Investor owned utilities are scared spitless and have been scrambling for ways to dig their hand into your pocket permanently.
Simply put, small scale renewable electricity generation developed at point of use is going to make the utility's centralized generation and transmission of electricity about as useful as teats on a bull. Rooftop solar, battery storage, fuel cells, geothermal energy systems, wind, micro turbines, and electric vehicle enhanced storage are becoming what the industry calls "disruptive challenges." A "disruptive challenge" is defined as “an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market.” An example of this would be cell phones, which have made made traditional land line phones all but obsolete as technology marches relentlessly onward. The report notes that it only took 10 years for cell phones and deregulation to destroy the telephone company business model.
The graphic on page 12 of the report tells the story at a glance. Technology Innovation and Energy Efficiency combine to produce lost revenue for the company. This requires the company to raise rates to continue to make money and pay stockholder dividends. As rates rise, customers assess the cost of implementing additional energy efficiency or investing in their own point of use generation system against continued passive purchases from the company's centralized system. As customers cut their usage or simply check out of the utility's system altogether, lost revenues result. Back to square one. It's a vicious cycle, and it's one the utility cannot win.
In order to survive, the utility industry needs to find new products and services that customers need in this brave, new, point of use renewables world, such as positioning themselves as solar leasing companies. But that's only one of the options presented to investor owned utilities in EEI's report. Much higher on the list are tactics such as:
1. Instituting a monthly service charge to make sure that the company can continue to recover its fixed costs and investments, even when customers use less electricity. Right now, these costs are being recovered through a cost of service rate scheme where customers pay a portion based on their share of system use (per kwh). Switching these costs over to a monthly service charge allows the utility to collect a fixed cost for a service it does not provide, such as Potomac Edison's current $5/month service charge.
2. Accelerate the recovery of investment. In current ratemaking schemes, the cost of utility assets are recovered from customers over the asset's useful life (30 or more years). This makes the monthly cost to each ratepayer very low. But, because the utilities fear those customers may disappear before the asset is fully depreciated and paid for, it proposes to accelerate the repayment period and charge you much more each month.
3. Institute a "stranded cost charge" for each customer who departs. In that case, you would pay a big fee to stop your electric service.
4. Institute a "customer advance in aid of construction" fee, which is nothing more than a big fee you would need to pay up front before starting electric service. Unlike a security deposit however, this fee is not refundable when you move or stop taking service from the grid.
EEI advises its member utilities to begin putting these new regulatory structures in place in your state right now. I advise you to oppose them.
Now the investor owned utilities and their trade association, Edison Electric Institute (EEI), have cooked up a new way to increase your monthly "customer fee," or to put in place huge new fees for new or departing customers.
A report issued by EEI back in January recognizes an emerging threat to the electric utility business model that will ultimately be its undoing. Investor owned utilities are scared spitless and have been scrambling for ways to dig their hand into your pocket permanently.
Simply put, small scale renewable electricity generation developed at point of use is going to make the utility's centralized generation and transmission of electricity about as useful as teats on a bull. Rooftop solar, battery storage, fuel cells, geothermal energy systems, wind, micro turbines, and electric vehicle enhanced storage are becoming what the industry calls "disruptive challenges." A "disruptive challenge" is defined as “an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market.” An example of this would be cell phones, which have made made traditional land line phones all but obsolete as technology marches relentlessly onward. The report notes that it only took 10 years for cell phones and deregulation to destroy the telephone company business model.
The graphic on page 12 of the report tells the story at a glance. Technology Innovation and Energy Efficiency combine to produce lost revenue for the company. This requires the company to raise rates to continue to make money and pay stockholder dividends. As rates rise, customers assess the cost of implementing additional energy efficiency or investing in their own point of use generation system against continued passive purchases from the company's centralized system. As customers cut their usage or simply check out of the utility's system altogether, lost revenues result. Back to square one. It's a vicious cycle, and it's one the utility cannot win.
In order to survive, the utility industry needs to find new products and services that customers need in this brave, new, point of use renewables world, such as positioning themselves as solar leasing companies. But that's only one of the options presented to investor owned utilities in EEI's report. Much higher on the list are tactics such as:
1. Instituting a monthly service charge to make sure that the company can continue to recover its fixed costs and investments, even when customers use less electricity. Right now, these costs are being recovered through a cost of service rate scheme where customers pay a portion based on their share of system use (per kwh). Switching these costs over to a monthly service charge allows the utility to collect a fixed cost for a service it does not provide, such as Potomac Edison's current $5/month service charge.
2. Accelerate the recovery of investment. In current ratemaking schemes, the cost of utility assets are recovered from customers over the asset's useful life (30 or more years). This makes the monthly cost to each ratepayer very low. But, because the utilities fear those customers may disappear before the asset is fully depreciated and paid for, it proposes to accelerate the repayment period and charge you much more each month.
3. Institute a "stranded cost charge" for each customer who departs. In that case, you would pay a big fee to stop your electric service.
4. Institute a "customer advance in aid of construction" fee, which is nothing more than a big fee you would need to pay up front before starting electric service. Unlike a security deposit however, this fee is not refundable when you move or stop taking service from the grid.
EEI advises its member utilities to begin putting these new regulatory structures in place in your state right now. I advise you to oppose them.
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