Land of the Fee and Home of the Sneaky

More utilities are penalizing customers who save energy and use clean sources with increased fixed charges

In the midst of another consumer battle with a water utility, I wondered why my latest statement from a third-party billing company contained no details on how the charges were computed. And I wondered why it took several phone calls and emails, and a nasty review on Yelp, to obtain a bill that showed those details.

I was used to seeing a variety of creatively-crafted fees somewhat hidden in the small print and figures that utility companies hope you overlook. Electricity provider Pepco assesses me a fixed “customer charge” of $7.80 per month, $3 for something called an “Empower Maryland charge,” and $4 for a county “energy tax.” Washington Gas company has a $10.20 per month “system charge” for taxes, maintenance and billing expenses, as well as a county tax based on usage.

Then there is water provider Washington Suburban Sanitary Commission. For my two-bedroom, one-bathroom apartment, my latest quarterly $96 bill from WSSC includes $40 in fees for “Chesapeake Bay restoration,” “account maintenance,” and “infrastructure investment.”

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Increased fixed charges by many utilities leave numerous consumers feeling like they are throwing money down the drain. [Kevin Shay photo]

The Chesapeake Bay fee of almost $14 per quarter is one collected for the state that is assessed at pretty much the same rate for most users. The account maintenance and infrastructure investment fees vary according to meter size; mine in 2018 were about average for my meter size.

While phone service is almost all computed through fixed tiers, the levels change based on usage, making it hard to compare with the other utilities. Among the various specific charges by Consumer Cellular are a $7 county wireless utility users tax and $2 “operational compliance fee.”

Here is the rundown of what part of my water, gas, and electricity bills come in the form of fixed fees or charges:

Utility……Fixed charges in recent bill…..Total Bill…Percent fixed fees
Water……………..…$39.58……………...…$96.35….……41%
Gas…………….…….$12.42………….…..…$30.56….……41%
Electricity………….$16.59………………….$54.60….……30%

So some 41 percent of what I am paying to the WSSC and Washington Gas was not based on actual use. And 30 percent of Pepco’s came in fees. This is unfair to lower-usage customers who try to conserve energy like myself, according to consumer groups.

In short, I’m being penalized for saving energy. I don’t know about you, but I think consumers should be encouraged to save resources and use clean sources such as solar. But that philosophy stands in the way of utilities continuing to rack up $ub$tantial profit$.

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Water bill from same provider, four years apart. At left, for a three-bathroom house in which 12,000 gallons of water were used in three months, the fees comprise 19 percent of the bill. At right, for a one-bathroom apartment using 6,000 gallons in three months, the fees comprise 41 percent of the bill. [Shay photo]

The move towards higher fixed charges by utilities nationwide has increased sharply in recent years, according to a 2016 report released by Consumers Union, the nonprofit organization that publishes Consumer Reports magazine.

Madison Gas & Electric in Wisconsin almost doubled its fixed customer electric charge from $10.44 to $19 in 2015. The company originally wanted to increase it to $22 a month, then all the way up to $67 by 2017, while lowering usage rates. A “storm of opposition from citizens, local governments and interest groups” halted that plan, while allowing the almost doubling of the fixed rate, according to a newspaper report.

Meanwhile, MGE also hiked the gas fixed charge by 80 percent to almost $22. MGE officials defended their push for higher fixed rates by saying they protect revenues better in the midst of reduced consumption due to solar energy and efficiency measures.

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Users of solar panels feel they are being targeted by utilities with higher fees for essentially doing the right thing. [Angie Warren/Unsplash photo]

In other words, those who try to save energy and use clean sources like solar are costing utilities money so they have to jack up rates. So much for encouraging clean energy and efficiency.

Such rate hike requests are not unusual. In 2015, some 61 utilities in 30 states asked for an average increase on fixed charges of 62 percent, according to a report released by the North Carolina Clean Energy Technology Center. Most hikes were held to more moderate levels, and in some cases no increase was approved by state regulators.

The largest approved case was for Omaha Public Power District, which about tripled the base fee from $10.25 in 2015 to $30 in 2018 as it lowered usage rates. The number of utilities requesting such fixed-charge hikes nationwide jumped to 71 in 2016 and 84 in 2017, before leveling off to 77 in 2018.

Another extreme request was made by Hawaiian Electric Companies, which sought an increase from $9 to $55 per month and to $71 for new customers. One media report even termed the issue in phrases used by the utility, saying HEC was merely going to “level the playing field” between users with rooftop solar panels and those who don’t. That system was “not sustainable” to the utilities, according to the report, which flies in the face of solar energy’s sustainable nature.

While that high rate was not eventually approved, the Hawaii Public Utilities Commission agreed to be the first U.S. state to end net metering, which credits solar users for the electricity they add to the power grid. The HPUC also implemented new tariffs on solar users.

The former Connecticut Light & Power — now called Eversource Energy — wanted to raise its fixed customer charge from $16 a month to $25.50 in 2014. But the state only allowed an increase to $19.25 per month.

The increased fixed charges reduce consumer control and disproportionately hit clean energy, low income and low usage customers, according to the Consumers Union report. “Customers who use less energy than average will experience the greatest percentage jump in their electric bills when the fixed charge is raised,” the authors wrote.

“There are many reasons a customer might have low energy usage: they may be very conscientious to avoid wasting energy; they may simply be located in apartments or dense housing units that require less energy; they may have small families or live alone; or they may have energy‐efficient appliances or solar panels.”

Low income customers tend to consume less energy, thus they are hit harder by these higher fixed charges than wealthier users. “Fixed charges raise bills most for those who can least afford the increase,” Consumers Union says. Utilities respond that they have increased programs that help low income customers pay the bills, though they generally do not aid every consumer who needs it.

Moreover, incentives to all customers to save energy are taken away. “With little incentive to save, customers may actually increase their energy consumption and states will have to spend more to achieve the same levels of energy efficiency savings and distributed generation,” Consumers Union says. “Where electricity demand rises, utilities will need to invest in new power plants, power lines, and substations, thereby raising electricity costs for all customers.”

Some utilities are responding to consumer protests. In 2018, Eversource reduced its fixed fee to $9.21, while increasing other charges. New York’s Central Hudson Gas agreed to lower its fixed charge from $24 in 2019 to $19.50 by 2021. And the Colorado Public Utilities Commission in 2018 rejected Black Hills Energy’s plan to raise the fee, approving instead a drop in half.

The argument that low usage customers are not paying a fair share is “usually untrue” since distribution costs are “largely driven by peak demands, which are highly correlated with energy usage,” Consumers Union says. Many such customers, like myself, live in apartment complexes and dense areas that result in lower distribution costs on the utility system.

Alternatives to increased fixed charges include setting minimum bills and time‐of‐use rates, Consumers Union says.

As expected, such hikes continue to help utilities and their executives rake in good-sized profits and salaries.

MGE Energy, the parent of Madison Gas & Electric, reported net income of $97.6 million in 2017 and $84.2 million in 2018, above the levels of the three previous years even as operating revenues declined. CEO Jeff Keebler saw his total compensation almost triple to $1.6 million in 2017 from about $660,000 in 2016. At least four other top officers made more than $1 million.

Omaha Public Power District saw net income rise to $77 million in 2017 after reporting a loss of $934 million in 2016, largely due to shutting down a nuclear power plant following flooding and fires. Hawaiian Electric Industries, parent of HEC, reported net income of $248 million in 2016, a five-year high, though that dropped to $165 million in 2017. CEO Alan Oshima made $2.8 million in 2017, up from $1.6 million in 2016. At least three other officials raked in more than $1 million in 2017.

Pepco, my utility in Maryland, had net earnings of $210 million in 2018 and $205 million in 2017, above the previous three years with revenues at a five-year high in 2018. Christopher Crane, the CEO of parent Exelon, took in $14.9 million in 2017 and $15.2 million in 2016. At least four other officials amassed more than $4 million those years.

Not bad pay, if you can get it, huh?

When I lived in a four-bedroom house in the same Maryland county with three bathrooms from 2013 to 2016, the extra fees from WSSC amounted to only some $26 per quarter, or 19 percent of the total bill. Back then, I only paid for bay restoration and account maintenance, not infrastructure investment.

And remember, that was for an entire house, not a relatively small apartment. In 2011, at a similar-sized, one-bathroom apartment, I paid about $45 per quarter with some $10 in administrative fees, or about 22 percent of the bill. Electric and gas fees have risen similarly since then.

So what do you do about this? Most of us groan and pay. Many are so used to paying fees to banks and credit cards and don’t have time to fight them. But the bank and credit card fees are ones most can theoretically control. I try to pay off my credit card balances each month to avoid finance charges and maintain enough in bank accounts to keep from being hit by those fees. But that doesn’t always work.

The utilities are a different matter since we don’t seem to have much of a say in the process. Even when we reduce consumption, utilities find ways to charge us more. A few consumers call and write the utilities and public officials, show up at hearings, and voice their concerns. Many don’t have time for that. You have to figure out what is worth your time. But at the very least, you should support consumer groups such as Consumers Union/Consumer Reports, Public Citizen, NRDC, and U.S. PIRG.

When I sent a complaint to the WSSC about the way it charges increased fees, I received a form asking me to request a hearing to reduce a specific fee. But even if I receive one fee reduction, that wouldn’t really help the situation. I seek a systemic change, one that is based on mostly usage again.

So I tried the state Public Service Commission, which is supposed to regulate utilities. But the Maryland PSC apparently doesn’t want to get involved in this mess. I received a letter in which the PSC claimed it could not pursue my complaint since the WSSC isn’t “generally subject to…the jurisdiction of the Public Service Commission when it is supplying services within the designated boundaries of the WSSC district.”

Oh really? So how come the PSC got involved in a WSSC case involving large rate users supposedly overpaying? So when large WSSC users have a beef, it’s under the jurisdiction of the PSC, but not when smaller users file a complaint?

After I responded by pointing out how the PSC found it within its duties to pursue other complaints against the WSSC, Linda Wade Hurd, assistant director of the agency’s consumer affairs division, replied that my complaint had to have been filed within “30 days after the date on which the [WSSC] set the rate or fixed the charge or assessment.” The Maryland General Assembly had given the PSC “limited jurisdiction” to review WSSC rates, she admitted.

Since my complaint missed this 30-day deadline — which apparently only comes once a year or so — the PSC did not have “jurisdiction to review the dispute or take any action on your dispute,” Hurd wrote.

The PSC and WSSC obviously hope people like me get tired and drop their battles. That may work for some. But I’m not done yet.

Written by

Written for 45+ newspapers/mags. Written some books — see https://www.amazon.com/Kevin-J.-Shay/e/B004BCQRTG. Visited 48 states, 30+ countries.

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