Who designed this crazy system?

Who designed this crazy system?

- in Top Story, Weekly Briefing

Newly approved Duke Energy Progress rate hike highlights the downright strange way that most Americans are billed for utilities

The North Carolina Utilities Commission issued a ruling last Friday afternoon in one of the two big Duke Energy rate hike cases it has been considering. As Policy Watch Environmental Reporter Lisa Sorg explained yesterday, the ruling in the Duke Energy Progress case will, for the most part, impact customers in eastern sections of the state who were once served by the now defunct Progress Energy (nee CP&L) before it became a part of Duke several years ago. A separate ruling is still yet to be handed down in the Duke Energy Carolinas case that will impact customers in the western part of the state. This is from Sorg’s story:

If for the one month you unplugged every appliance and electronic, unscrewed every light bulb, and forsook heat or air conditioning — living by candlelight, blankets or paper fans, and Sterno — you would still get an electric bill. You’ve used no power, but would have to pay Duke Energy Progress a $14 “basic charge” — the cost of maintaining the line, meter and other infrastructure to get electricity to your home.

That price used to be $11, but late Friday, the NC Utilities Commission approved an overall rate increase for DEP customers, including a 26 percent hike in the basic charge to $14.

The 278-page ruling was released shortly before 5 p.m.

Overall, the commission cut Duke’s original request of a rate increase — an average of 15 percent based on $477 million in annual revenues — by half. But how that increase is spread among Duke Energy Progress’s industrial, commercial and residential customers is still to be determined.”

Not surprisingly, the ruling was controversial. Environmental and consumer advocates (including the North Carolina Justice Center, the parent organization of NC Policy Watch) decried the decision to increase the basic monthly charge as regressive and as a disincentive to conservation. “We are disappointed that the commission did not stand up for customers—especially those struggling to pay their bills, which are now more than 1.4 million households,” said Gudrun Thompson, senior attorney at the Southern Environmental Law Center. “While Duke is enjoying record profits, the commission undercut customers’ ability to reduce their energy use and lower their bills with cost-effective energy efficiency.”

Our Rube Goldberg utilities system

While critics of the ruling raise a lot of valid and important points, one matter that remains generally undiscussed and unaddressed in the Duke case (and in the world of public utilities more broadly) is the matter of how Americans ever got to this point at which they find themselves when it comes to purchasing public utilities.

No, this is not to offer up an indictment of the regulated monopoly model or, especially, the true public utility that’s owned and operated by government or a private nonprofit. Simply put, the regulated monopoly/public utility model makes eminent sense when you’re talking about running lines or pipes through public right-of-ways and into private homes and businesses. It would be absurd, wasteful and hugely destructive for society to sanction a situation in which competing providers ran multiple sets of lines and/or wires side by side.

As such, it’s clearly essential for government to regulate the monopoly providers who provide the electricity, natural gas, water and sewer services that customers consume. And while one may rightfully and even strongly criticize how that model is currently implemented and applied (see the Duke discussion above), its existence cannot be seriously questioned. As we learned during the early years of this century, the idea of “deregulating” electricity sales is terribly fraught and one that carries huge risks.

No, the craziest and largely unaddressed part of the current American utilities system relates to the matter of how and when people are billed and made aware of how much energy or water and sewer they have used.

Think about it: What other product or service do Americans purchase at such a dear price while having almost no idea of how much they are buying?

The mystery bill

Every month, a huge percentage of North Carolinians receive separate bills for electricity, natural gas and water and sewer. These bills generally consume a sizable percentage of the average family’s income and represent the costs of what are clearly necessities of modern life.

And yet, as important and central to modern life as these purchases are, most families have, quite literally, no idea how much of each utility service they are consuming and/or how much they are spending until the bill arrives at the end of the month.

Can you imagine if we filled the gas tanks in our cars in such a way?

The explanation for why this is the method of billing no doubt has its origins – at least in part – in technology (or the lack thereof). For many decades, Americans got billed this way because that’s how utility meters were designed. Readings on meters had to be read and then transcribed by the utility providers into dollars and cents.

But how can this possibly still be the way these things are sold in 2018?

If Americans and the giant utilities that serve them are truly serious about conserving energy and water resources, the simplest and most obvious first step would be to put visible, easy-to-read meters in everyone’s home, right next to the thermostat and the kitchen sink, that provide a constant, real time readout of one’s monthly, dollars-and-cents bills. It’s hard to think of anything else that could make it easier for a consumer to keep track of and regulate their usage.

Of course, such concepts are not completely foreign. Increasingly, with the advent of modern digital technology, a growing number of businesses and higher income individuals who live in newer homes are gaining access to such information through PC’s and smart phones.

But such basic information ought not to be the mere province of technologically savvy and relatively well-heeled customers. If there’s anyone who could really use and benefit from a handy, easy-to-read, in-home meter, it’s the fixed income senior and/or the lower income family. For many electricity customers in North Carolina, the meter would now start at $14 on the first day of every month. (“Net metering” in which consumers with solar panels send electrons back onto the grid would actually allow consumers to see their bills run backwards.)

Obvious roadblocks

There are many obvious and not insignificant hurdles that stand in the way of such a 180-degree transformation in the way Americans are billed for their utilities. For a large percentage of Americans, of course, utilities are included in the rent. Installing individual meters in every single abode would also, admittedly, be costly and challenging in many instances. The complications for landlord-tenant relationships that can arise when individual apartments are “sub-metered” are another real concern.

If there’s a most obvious roadblock to implementation of such a simple and straightforward approach to utility conservation, however, it’s clearly the utilities themselves. If a company’s purpose is to sell a lot of electricity or natural gas, it’s a heck of a lot easier and more lucrative to send out an occasional conservation reminder flyer of uncertain sincerity than it is to give each individual consumer the means and obvious, in-one’s-face incentive to self-monitor and regulate one’s own usage.

Clearly, if utility companies wanted to make utility meters accessible and easy to read for consumers they could have done so long ago. The fact that they have never done so speaks volumes.

The bottom line: While it is vastly better than the chaotic free-for-all that might exist without it, the current system for regulating American utilities is far from perfect. As the latest Duke Energy rate case ruling makes clear, even a robust regulatory system can struggle to contain the avarice of giant, multi-billion dollar corporations, much less bend their actions toward service of the common good.

Perhaps in the future, those regulators can enlist average consumers more directly as teammates in the effort.

About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
rob@ncpolicywatch.com
919-861-2065