Man on a ladder looking at a ductless heat pump head unit.
EWEB Proposing to Eliminate Higher-Cost Residential Electric Charge 08/21/2018

EWEB Commissioners in September will consider eliminating the second, higher-cost residential electric consumption tier and replacing it with a single flat price.

The utility currently assesses a consumption charge of about 6 cents per kilowatt hour for the first 800 kilowatt hours used by a customer. Once monthly usage goes above 800 kilowatt hours with the current structure, customers move into the second energy consumption tier at a kilowatt-hour price of 7.5 cents.

Under the price reform proposal, EWEB would eliminate that second tier price and charge all residential customers a flat price of 6.5 cents a kilowatt hour.

EWEB first adopted tiered pricing in 2003, following the volatile West Coast energy crisis that caused wholesale electricity prices to spike, and forced the utility to make expensive market purchases to meet customer demand. That tiered pricing structure no longer reflects our true cost for power. With current market conditions, we typically don't have to pay more for additional power, so we shouldn't pass nonexistent higher costs to our customers.

There are many good reasons to make this change.

Eliminating the higher consumption tier and going with a single residential price will stabilize bills year round, making it easier and more predictable for fixed-income customers to plan and budget. In addition, a single residential consumption price will help alleviate the "sticker shock" during the winter heating season when more than 60 percent of customers move into the higher-priced consumption tier. That second tier price effectively acts as a "heating penalty" for the majority of customers.

Another benefit to setting a flat consumption rate is that it will help incentivize electrification, allow EWEB to showcase its virtually carbon-free power portfolio and help the utility be more competitive with natural gas.  

Plus, the second tier is invisible to customers, who don't know when they go above the 800 kWh threshold until they get their bill. Charging a slightly higher rate for winter heating is not a particularly effective conservation price signal or behavior motivator.

A more effective strategy to encourage conservation is through direct incentives such as rebates and loans for efficient heating/cooling systems and weatherization projects. EWEB continues to invest in conservation programs, and increased the 2018 energy efficiency budget by $250,000.

While low energy use customers will realize a marginal price increase of about a half-cent per kilowatt hour under this proposal, most customers will see lower bills during the heating season with the single flat rate. Based on consumption levels, some customers may see bills increase by $1 to $4 a month.  The table below shows the difference in monthly expenses for a lower usage customer compared to a more typical customer using electric heating.

Average Monthly Use Current Electric Price Proposed Electric Price
750 kWh $84.79 88.69
1500 kWh 159.49 156.88

 

It's important to note that low energy users do not necessarily equate to low income customers, as household size and heating systems are more indicative of energy consumption than income.

We remain committed to affordability of our products and services. 2019 will mark the fourth year in a row with no general increases to our electric prices. Commissioners and staff are also working on plans  to restructure and reallocate low-income bill assistance and energy efficiency programs to ensure the highest benefit to our customers in need. We believe these tactics will prove more effective at helping customers reduce their bills while conserving energy compared with retaining arbitrary consumption tiers.

Before moving forward with this proposal, EWEB organized a Customer Pricing Committee to study different options to help make structural reforms to the manner in which the utility recovers costs. The committee recommended a gradual approach to these reforms, and endorsed the elimination of the second pricing tier.

Many utilities are moving to fewer tiers or outright flat rates in order to stabilize their financial positions as they prepare for a future where they cannot rely on the old model of consumption growth to meet the rising costs of delivering power to customer homes and businesses.

This incremental step will help position EWEB and our customers for a financially stable future given the fundamental and dynamic shifts taking place in the electric utility industry.