Your electric bill is about to go up, maybe by a lot. But if you want to exactly know what the bill is going to do next year, you’re out of luck.
“It’s really, really hard. The idea that you can somehow easily figure out what a typical monthly bill is very tricky,” said Don Kreis, who has spent years as the state consumer advocate diving into this very question.
The complication is that your bill depends on several different rates, only some of which are linked to how much power you use and only some of which are changing right now. Some utilities give you choices of rates, such as time-of use rates, which can alter your monthly payment. Plus there are competition energy suppliers that have different power rates as utilities.
So when Eversource New Hampshire, for example, says its new rates raised the average residential bill $13.61, or 9.9% starting Aug. 1, that may not have any connection with the change that you see.
This summer all four utilities serving New Hampshire — Eversource, Unitil, Liberty and the NH Electric Cooperative, as well as competing energy suppliers like the Community Power Coalition — have raised their supply rate, which is the cost of each electron you use.
That reflects rising wholesale costs spurred in large part by increasing demand; the U.S. broke daily power consumption records twice in July alone.
But that’s not all that is happening.
Several components to a bill
Consider Eversource New Hampshire, which serves about 71% of all homes and businesses in the state. After a complicated and contentious rate case, the state Public Utilities Commission recently allowed it to raise your bill by — well, that depends.
Your power bill has several components. The supply charge gets the most attention even though it is a pass-through, meaning the utility buys power on the open market and charges you the same price with no profit.
This supply charge is changed twice a year, on August 1 and Februaru 1, following a Public Utilities Commission rate case. Eversource’s rate most recently went from 8.9 cents per kilowatt-hour to 11.2 cents, a 26% hike. The rate almost always goes up in summer due to greater demand.
But that’s not all that happened, since the supply charge only makes up about half of the average consumer bill.
Your bill also contains the distribution charge, which pays for the low-voltage system that comes to your house and is regulated by the state, plus the transmission charge, which pays for the high-voltage system that sends power via towers across state lines and is regulated by the Federal Energy Regulatory Commission.
These get bundled together as T&D on your bill and are changed only after the utility requests a special rate case with the state or the feds. Neither is changing right now.
Supply and T&D are all charged per kilowatt — the industry term is “volumetric” — meaning you can reduce them by using less power. Bills can also contain a few very small charges for things such such as stranded assets that are also volumetric.
But then there’s the residential customer charge.
Fixed and unavoidable
The residential customer charge is a fixed cost that you have to pay every month even if you turn off everything in the house — even if you have solar power that generates more electricity than you use, in fact. It is designed to cover costs like poles, meters and customer service reps that the utility has to pay for regardless of how much electricity they sell, which is why it isn’t based on customers’ usage.
“This is always a controversial aspect of a rate case,” Doug Horton, Eversource senior vice president of regulatory and strategic financial planning, said of the residential customer charge.
The Public Utilities Commission allowed Eversource to raise this rate a full 43%, from $13.81 to $19.81, and in a first, it also allowed an automatic increase of $2 every year thereafter.
Horton said Eversource recognizes that the charge is a burden on lower-income users but said it’s a necessary evil. He said an internal study of costs to the utility “produced a fixed-customer charge that was much higher than we proposed. Just based on the study, it would be over $40 a month.”
The hike in the residential customer charge drew considerable criticism, most notably from AARP, the statewide organization serving older residents. Gov. Kelly Ayotte also criticized the ruling, although she wasn’t specific about exactly what drew her ire.
Kreis, the consumer advocate, particularly dislikes the charge. “The more of the cost of the system is stuffed into the fixed monthly charge the more unfair it is to residential customers,” he said. “It punishes consumers because there’s nothing they can do to control that charge, and it’s a profound disincentive to conservation.”
There is also suspicion in the industry that utilities are shifting costs onto this charge because it can’t be bypassed. In other words, if you live in in a Eversource service area you will pay that charge even if you buy your electricity from a competitive supplier like Community Power Coalition.
Bypassing rate cases
That’s not all the Public Utitilies Commission did, however. In the most unusual move, it partly agreed with Eversource’s request to bypass twice-annual rate cases when changing the supply rate, instead allowing the company to change change the rate within certain parameters without the commission’s oversight. This system is called performance-based rates.
Utilities argue that the current rate cases, born back in the days when change in the electric system was slow and predictable, doesn’t fit anymore and often leads to big, confusing changes in rates.
“The traditional model of having rate cases can be disruptive — you have rate cases with large increases,” said Horton. “The idea is to have rates change more gradually over time, and utilities are highly incentivized to have efficient cost control.”
“I am a true believer in PBR, I feel we need a framework like this,” he said, arguing that Massachusetts and Connecticut, the other two states where Eversource operates, are looking at the possibility.
Despite that, Eversource might challenge the commission’s ruling because of the way regulators set up the performance-based rate system. Kreis said he may also request a rehearing.
Why is it so complicated?
What’s behind all the complexity? Change, coming fast and furious.
The once staid and boring power industry has been upended in the past decade by technology like solar panels, batteries and smart meters, which have turned a simple one-way flow of power into a complicated two-way dance.
The more immediate issue is demand, which was flat for many years but is now growing fast as transportation and housing switches to electricity and as A.I. forecasts massive needs, including one data center in Wyoming that wants to use more power than every home in the state combined. The Trump administration’s decision to block wind and solar power, the fastest-growing additions to electricity production all around the globe, makes it all the harder to cope.
The result is that systems established in the 20th century to pay for electricity are struggling to deal with the 21st century.
“How do you decide what a… fair rate is? That’s a very tricky thing with a lot of subjectivity embedded in it,” said Kreis. “That’s why they call it ‘rate design’.”