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Utilities Propose Higher Fixed Charges to Make Up for Lost Revenue Due to Conservation Efforts

October 23, 2015—Several utilities nationwide have been proposing higher fixed charges for customers, up to double-digit percentage increases, according to a recent report in the Wall Street Journal. This was the case in Missouri and Kansas where the fixed rate was proposed to rise from $9.00 and $10.71 respectively, to $25.00 and $27.00 respectively.

According to an Economic Opportunity Studies (EOS) webinar, utilities in 22 states have already begun the process to propose a fixed rate increase, with at least six more that may propose increases within the next two years. Twelve others are considering making proposals but their timeline is unknown at the moment. The electric industry's lobby group, Edison Electric Institute (EEI), has been encouraging utility companies to propose these higher fees in order to guarantee more dependable revenue streams for the utilities. This increase in revenue, they claim, would help utilities maintain infrastructure and make up for lost revenue due to energy conservation efforts.

The EOS points out, however, that the proposed fixed rates take the power to control bill amounts out of customers' hands and would have a negative impact on low-income customers who use energy conservation as a means to keep their utility bills affordable. Fixed rates, they state, would force customers to pay a set rate, regardless of how much electricity they use each month. Those who conserve energy would see an increase in their bills, while high-use customers might actually see a decrease.

However, the EOS encourages consumer advocates and other interested parties to get involved in the rate cases in their respective states and provide testimony about the effects such a rate increase would have on the people they represent. Because of such efforts, the public utilities commissions in Missouri and Kansas countered the rate hikes with a more modest raise instead. The Missouri commission approved an $11.88 customer charge, while Kansas approved a $14.00 customer charge. In Minnesota the commission rejected the rate hike proposed entirely. They retained the original $8.00 customer charge due in part, they stated, to a settlement with several parties and because of public policy that encouraged energy conservation.

Sources: Media Sources, Economic Opportunity Studies, Inc.