All content copyright © 2004-2010 by steve hardyThe monthly power bill at our rental property over in Winthrop jumped pretty dramatically a couple months ago. Making meaningful comparisons is challenging because of rate structure changes combined with inconsistent usage patterns, but at least from our initial two samples, the effective increase to us looks to have been around 60% (compared with bills just prior to the change).
The back story is that the electric company (the co-op) had to raise their rates to offset both recent rate increases they pay to BPA for their power, and revenue impacts from the lousy economy (lower economic activity lowers overall power usage).
The co-op seems to have taken some pains to make the rate increase fair, while also trying to fix some inequity in their existing billing structure. Of course, fairness is a slippery concept in any universe that consists of more than one point of view.
Stated goals of the co-op billing structure:
There are also secondary goals like having a rate structure that encourages predictable and uniform use of power. A worst case scenario from the power company perspective would be if every customer consumed power only during the same short window during the day, and all demand is seen during that time at the edge of the network. The co-op is a power reseller that pays for power based on peak usage. Price contracts with its provider (BPA) are negotiated each year based on expected customer usage. If customers used significantly less than expected, there's an effective penalty in that co-op must still pay for some agreed upon minimum.
Whenever customer demand combines to peak above the expected/contracted usage, the co-op must purchase the additional power at a premium price, outside of their prearranged contract. The co-op could get its best possible price on power (per KWH) if power usage were known to be uniform at all times. (Note that according to this thinking, conservation, per se, isn't a goal of the power company. Rather, they seek to improve predictability and uniformity of power usage).
One of the problematic use cases that the rate changes sought to improve is that customers with vacation homes in the area weren't paying enough to cover their share of the fixed power delivery expenses. The distribution network must be maintained to support peak demand, whether or not any power is actually consumed. And furthermore, the usage pattern for these mostly absentee property owners tends be that they show up during vacations and crank up their electric load, contributing disproportionately to a network wide demand spike. To meet the added demand, the co-op must pay for additional high cost power.
Recent upgrades to customer meters have allowed the co-op to more closely track power usage of individual customers. This in turn allows bills to more closely reflect peak demand of customers, which according to some, improves fairness.
A significant number of customers are upset about the rate change, feeling that they were now bearing an unfair amount of the cost. Some openly question motives behind the rate hike, insinuating that board or employees are somehow extracting an unfair advantage. (I'm disinclined to give much weight to what sound like conspiracy theories. I have no reason to think that the board and employees are anything but hard working and well intentioned neighbors.) There are others that hope to identify a more fair approach, without necessarily disparaging those who developed the current plan. At a recent ratepayers meeting, many stood up and offered suggestions about how to restructure rates to improve fairness. I didn't attend this meeting, but one who did noted with interest that all who spoke apparently defined fairness as a means or rationale for shifting the burden of costs from themselves onto some other group of ratepayers.
A commonality of approach for speakers had that this is not a difficult problem. Surely we can come together to work out a more fair approach for distributing these costs. This is not rocket science.
I suspect otherwise. It is a difficult problem, every bit as intractable as rocket science. And a difficult problem is most effectively addressed with the attitude of one who seeks to address a difficult problem.
An ISP faces similar billing challenges. They contract to buy Internet bandwidth, and then resell it, with varying value add, to customers. The ISP pays for bandwidth based on expected peak usage. When usage exceeds expectations, the ISP pays a premium to make up the difference. So when, for example, it becomes common that a significant chunk of an ISP's customers start watching movies streamed over their Internet feed at 7pm each evening, that's going to constitute a peak system load on which the ISP gets billed. The ISP can negotiate much better (mbps) rates with the upstream provider when the bandwidth load gets distributed more uniformly throughout the day. (So the ISP explores ways to encourage 'bandwidth conservation' and distribute those peak usages more uniformly. e.g., what about a rate reduction for downloading video content beforehand, at off peak hours? or a rate surcharge for consistently consuming high bandwidth during peak hours. One possible effect is that billing then seems more complex, and by some measure, less fair.)
All else being equal, customers will likely tell you they prefer rate reductions/rewards over rate surcharges/penalties. But I'm not sure I'd draw any significant conclusions from that without additional support. I certainly continue to pay my mobile phone bill every month in spite of feeling shafted by surcharges/penalties with clockwork regularity.
Here's another discussion (http://www.servicelevel.net/rating_matters/newsletters/issue14.htm) of issues associated with the seemingly simple problem of billing.
posted at: 23:04 | path: | permanent link to this entry
All content copyright © 2004-2010 by steve hardy