As is fairly routine, many utilities across the United States have recently either put in a request to raise their rates, or have recently received approval to raise their rates. This can mean different things to different consumers, depending on where they live in the United States and their utility — this can mean an electric bill increasing 80 cents or $8.
For those on fixed incomes, these type of rate increases can really add up.
Why is My Utility Raising Rates Again?
This is an all too common question in some cities and towns across America.
There are many reasons why utilities may request a rate change. The most common reason given (and reasons must be given) is the fact that they often need to make repairs, updates, etc. to existing equipment and that cost trickles down to the consumer. Sometimes the rates are increased in order to keep up with cost of living, as well as changes in weather and environment.
The good news for consumers is that in order for a utility to change rates, they need to put in a request via a “rate case” with their Public Utility Commission (PUC). It is a regulatory process, a process in which even the federal government can get involved in under certain conditions. Federal Energy Regulatory Commission (FERC) is the governing body on the federal level.
The reason why utilities are required to request rate changes is to try and create a “natural monopoly.” Its purpose is to prevent utilities from changing their rates whenever they want, or increasing them in an unreasonable manner. Consumers also have the opportunity to voice their opinions, which the PUC takes under consideration.
When a utility requests a rate change, the request needs to meet several goals. These goals include:
- Incentive to be efficient
- Capital attraction
- Demand control or consumer rationing
- Income transfer
- Reasonable energy pricing
Bonus: Learn how utilities determine generation/distribution rates.
Recent Utility Rate Requests and Increases
It’s only two months into 2017 and there are already many utilities in a variety of states that are either attempting to raise their rates or have already had a rate increase approved.
Some of these utilities include:
Tucson Electric Power Co. & Trico Electric Cooperative
State: Arizona
Approved or Disapproved: Approved
Effective Date: March 1, 2017
Number of Customers: 417,000 (TEP), 43,000 (Trico)
Energy Regulated/Deregulated: Energy Regulated
In early February, state regulators approved an increase in rate for Trico Electric Cooperative (Trico) and Tucson Electric Power Co (TEP).
For TEP residential consumers, this means that they will see their bills increase an average of $8.50 per month. TEP basic monthly charges will go up $3 to reach $13 (from $10) for standard rates. However, residential time-of-use rates will lower from $11.50 to $10. These rates will go into affect no later than March 1, 2017.
For Trico customers, a rate increase was approved taking basic monthly charges from $15 to $20.
Pacific Gas & Electric Company
State: California
Status: Approved
Effective Date: December 2016
Number of Customers: 26 million
Energy Regulated/Deregulated: Energy Regulated
Number of Employees: 19,424
Founded: 1905
Between December 2015 and 2016, Pacific Gas & Electric (PG&E) had many different and approved rate increases. The results show that many residential consumers are now seeing an increase of around 21% in their monthly bill. It is currently not clear what impact these rates will have on businesses.
The rate increases are primarily going towards PG&E’s storage and pipeline fees, as well as gas transportation. Experts say that the reason why consumers didn’t see an increase earlier is due to the fact that the winter in 2016 was much warmer compared to 2017 (so far).
DTE Energy
State: Michigan
Status: Approved
Effective Date: February 7, 2017
Number of Customers: 3.4 million
Energy Regulated/Deregulated: Energy Deregulated
Number of Employees: 10,262
Founded: 1995
DTE energy is raising its rates by 4%. Approved by the Michigan Public Service Commission the increase went into effect in early February.
Michigan regulators have authorized DTE Energy to increase electricity rates by 4 percent. The increase will help DTE to replace and modernize its current equipment and infrastructure. According to officials, this increase means that customers’ bills still remain below the national average.
Farmington Electric Utility System
State: New Mexico
Status: Approved
Effective Date: January 24, 2017
Energy Regulated/Deregulated: Energy Regulated
Number of Customers: 45,000
Service Area: 1,718 square miles
In early 2017, Farmington’s City Council approved a new rate structure for the utility. This new structure mostly impacts consumers with solar panels. New solar panel customers will need to pay $7/month for each kilowatt their system generates. Should the customer produce all the energy they require, the city will credit them for the amount and rate that is standard when purchasing power. Other increases will raise residential rates by 16%.
These new rate will particularly impact customers living within San Juan County, most of whom receive power from this utility.
Florida Power & Light
State: Florida
Status: Approved
Effective Date: March 1
Energy Regulated/Deregulated: Energy Regulated
Number of Employees: 9,000
Founded: 1925
Florida Power & Light (FPL) implemented rate hikes in order to help pay for hundreds of millions worth of damage that occurred during Hurricane Matthew. The increase will average to $3 per month, and approximately $120 per year.
This rate increase applies to all consumers within the state, even if the hurricane did not damage their particular area.
City of Fort Meade
State: Florida
Status: Pending final Vote February 14, 2017
Effective Date: N/A
Energy Regulated/Deregulated: Energy Regulated
If approved, this rate increase will cause residential consumers who use an average of 1,250 kWh-hours per month to experience a 5.75% jump on their bill. This means that customers who currently pay $152.40 will have to pay $161.20. City officials will participate in a final vote on February 14th and state that the increase will help prevent further increases in property taxes.
The increase will give the city $135,000 in additional funds.
Eversource
State: Massachusetts
Status: Pending approval
Effective Date: N/A
Energy Regulated/Deregulated: Energy Regulated
Founded: 1966
Eversource is a utility that has requested a rate increase that will give it an additional $96 million in revenue. This additional revenue will help the company to reach 10.5% shareholder profit goals.
An attorney general has announced her opposition to the rate increase, stating that Eversource need to justify the increase as, “Eversource should be returning profits to customers as savings.”
Based on the proposed increase, Customers of NSTAR Electric Company and Western Massachusetts Electric Company will experience the increase more so than National Grid customers.
Dayton Power & Light Company
State: Ohio
Status: Pending
Effective Date: N/A
Energy Regulated/Deregulated: Energy Deregulated
Number of Employees: 21,000
This utility is dealing with a settlement and if their electricity security proposal is approved, the company will see a few changes. These changes include,
- Closing of two coal powered plants
- Development of infrastructure
- Rate increase for customers
What this means for customers is that if they use 1,000 kWh hours their monthly bill will increase by approximately $2.39.
Other Utilities with Rate Increases
Some other utilities that have approved or proposed rate increases in 2017 include:
- Bonneville Power Administration – Oregon
- Arizona Public Service – Arizona
- Western Area Power Administration – Lakewood Colorado
- Cumberland Valley Electric – Kentucky
- Illinois Municipal Electric Agency – Naperville, Illinois
- West Penn Power – Pennsylvania
Other Utilities with Rate Increases – Canada
The United States isn’t the only country that typically sees requests and approvals for rate increases. There are several other utilities just south of the boarder that have also requested to increase rates. Examples of some of these utilities include,
- City of Summerside – Ontario, Canada
- Nelson Hydro – British Columbia, Canada
- Lakefront Utilities – Ontario, Canada
Rates & Energy Deregulation
In a regulated energy market, the utility is responsible for all elements of the electricity business process. This means that when a consumer purchases and consumes electricity, they must do so from the utility. Since all elements of the electricity process are handled by the utility, this naturally also decreases the need for any competition. In many cases, the utility becomes a monopoly, which is frustrating for consumers who don’t have any other options when rates are increased.
In a deregulated energy market, however, this relationship changes. Living in a deregulated area means that consumers have the option to choose their electricity provider — and go with the electricity rates they provide. Electricity providers are organizations that are allowed to sell supply related services and products to consumers. In these situations, the customer’s bill is spilt or divided into two parts. One of these parts represents the supply charges from the electricity provider. The second part represents the charges from the utility. Utilities in a deregulated market continue to charge customers for services related to the delivery and maintenance of electricity.
In a deregulated market, providers compete with each other to gain the patronage of local homes and businesses. Electricity providers are inclined to offer the best rates and services in order to keep and attract customers — unlike a utility in a regulated market. While there are certainly great utility companies out there, most of them certainly don’t have any real competiton.
