Omaha’s public electric utility aims to join the nationwide trend towards higher fixed charges, but opponents are organizing to defeat the measure.
The Omaha Public Power District (OPPD) has proposed gradually hiking its fixed fee for residential and small business customers from the current monthly charge of $10.25 to $35 by January 2019. The fixed-fee hike would be accompanied by a small reduction in the cost per kilowatt hour, which the company says would maintain revenue neutrality.
Utilities across the country have proposed such fees in order to compensate for stagnant power sales and falling revenue from off-system sales, but some observers say the approach is starting to lose favor.
In addition, the utility has asked its board of directors to approve an overall 4 percent rate hike. The board is to consider the two issues separately at its Dec. 17 meeting.
“I haven’t heard from anyone who is upset about the 4 percent increase,” said Kay Carne, an OPPD customer who is outspoken about her discontent about a higher fixed fee. “The people I have talked to are not happy with the fixed-fee increase because that is going to take control away from peoples’ bills.”
Carne is part of a coalition that is circulating petitions urging the utility’s board of directors to reject hiking the fixed fee.
OPPD spokeswoman Jodi Baker emphasized that the proposal to more than triple the fixed fee is not a done deal. The utility is listening closely to customers, she said, and could decide to modify the proposal.
The National Association of State Utility Consumer Advocates earlier this year took a position against substantial increases in fixed fees, and voiced concern that fixed fees disproportionately burden those who use minimal amounts of energy – often those with small incomes. The advocates also warned that high fixed fees undermine energy efficiency.
In fact, Baker said, customers who use small amounts of power would see their bills increase modestly under the Omaha utility’s proposal, while the customers who use the most energy would enjoy a small decrease in their bills.
“It’s putting an undue cost burden on the poor,” Carne said. A $35 monthly fixed fee amounts to $420 that must be paid each year “before they even turn on a single light. That’s a substantial amount of money, especially for people who make $15,000 a year.
“If they need more revenue, then raising the kilowatt-hour charge would be fine. My issue is with increasing the fixed fee.”
Although the utility contends that a higher fixed fee would more fairly assess the costs it incurs, Carne challenged that notion. The costs to deliver power vary tremendously, she said, between urban and rural customers, and between those in new housing versus those in older, established neighborhoods where infrastructure may largely be paid off.
Another problem with high fixed fees is that they tend to undermine the economics of energy efficiency, said David Corbin, vice-chairman of the Nebraska Sierra Club and president of Nebraskans for Solar.
With a $35 monthly fixed fee, the utility estimates that, on average, about 35 percent of the bill would not fluctuate with usage. At present, only about 10 percent of the bill falls within the fixed portion. Efficiency improvements become less attractive as they impact less and less of the bill, he said.
It’s a similar story for solar panels. The large upfront cost of installing solar panels would require a much longer payback period with a higher fixed fee.
And, Corbin said, “The first thing people ask about with solar is, ‘What’s my payback period?’”
Corbin doesn’t necessarily dismiss the utility’s claim that it requires more revenue. But he suggested that there are ways to increase revenue without burdening low-income customers, and without disincentivizing efficiency and renewables.
For example, he said, the utility could reverse its block billing system and charge customers higher rates as they use more electricity. That would benefit small users, reinforce efficiency and renewables, but provide a means for the utility to increase revenues, he said.
The company also could gain more revenue – without undermining efficiency and renewables – by charging higher rates for power at times of peak demand. This could bring in more money while relieving the utility and its customers of power that tends to be very costly and very polluting.
Baker said the company has considered that, but doesn’t have the requisite smart-meter technology in place.
In this period of decreasing demand for power from a central generation source, Corbin said, utilities need to think creatively.
“They need to keep in business, and they need wires going from one place to another,” he said, “but there are many other ways to do this.”