Energy consumption and electricity billingHigh fixed charges compromise consumers

Starting mid-February, the US National Association of Regulatory Utility Commissioners (NARUC) begins revising the electricity rate design. Against this background the US consumer organization Consumers Union (CU) presented a report on how fixed charges on electricity bills compromise US consumers. In the study "Caught in a Fix: The Problem with Fixed Charges for Electricity" the trends and drivers behind fixed charges and their impact on customers are analyzed. The report offers the following key findings:

  • Generally speaking, low energy-consuming users tend to be low income households. These households are hit hardest by increased mandatory fixed fees. For instance, raising the monthly fixed fee by $16 would result in a 17% higher bill for low energy users (500 kWh/month) compared to a 4% increase for users with higher energy consumption.
  • Energy utilities push for increases in fixed charges to recover their costs rather than through rates based on usage. Between September 2014 and November 2015 the US utilities commissions received 51 corresponding proposals to increase charges.
  • Increasing fixed charges reduces customer control and energy efficiency. With bills independent of the actual energy consumption, consumers have neither incentives for energy efficient consumption nor means to reduce their costs.

Shannon Baker-Branstetter, policy counsel for Consumers Union, commented on the report as follows: "Our report investigates how mandatory fixed charges reduce people’s ability to control their bills with their energy consumption, and how they disproportionately impact low-income consumers. These charges undermine incentives for energy efficiency and can lead to higher electric system costs. Utility companies continue to push these misguided proposals, even though utility commissions have repeatedly rejected or limited them. Rate designers need to take a close look at this record against fixed charges."

Source: Consumers Union

More information and the report