Dive Brief:
- Lincoln Electric System (LES) will increase its monthly fixed charge to residential customers by $2.25, from $11.15 to $13.40, the Lincoln Star Journal reports, but its per-kWh rate will remain unchanged for the second consecutive year.
- Based on staff recommendations to the municipal utility’s board, the fixed charge will continue to increase annually. The objective is to shift recovery of fixed costs for grid maintenance and upgrades to the fixed charge portion of the residential customer bill over the next eight to ten years.
- Utilities are increasingly seeking hikes in their fixed charges as flattening load growth and the proliferation of distributed generation is compromising their ability to recover infrastructure costs normally paid by per-kWh energy charges.
Dive Insight:
With fixed charges set to rise and volumetric charges staying constant , LES expects the bills of low-use residential customers to be slightly higher, those of higher-use customers to be slightly lower, and those of customers with average electricity consumption to change little. The bulk of commercial-industrial customers’ bills are already made up of high demand charges and will therefore be largely unaffected by the changes.
Like many of the 48 utilities to 50 utilities identified by EQ Research with active rate cases involving fixed charges, LES is concerned that while the bulk of its remuneration is derived from the use-dependent volumetric energy charge portion of the residential customer bill, the bulk of its costs are fixed.
To keep rates from increasing, the LES staff proposal cuts $1 million from a $4 million sustainable energy program in the utility’s $380.6 million budget, and then allows it to gradually increase back to $4 million by 2017. Staff also rewrote the budget to buy down the rate increase with $2 million of a $10 million-plus BNSF legal settlement.
