Mandatory Minimum Fees for Customers
In an effort to stave off further revenue losses Jacksonville Energy Authority CFO, Melissa Dykes, has proposed a board motion to imposed new mandatory minimum charges called “Demand Charges” on Jacksonville customers. Dykes blames future compliance costs associated with the clean power plan and believes demand charges would make customers use energy more efficiently.
This is where we need your help to take action immediately and tell JEA not to implement these charges!
The problem with Dykes beliefs and report to the board is there is no real factual evidence that proves demand charges help customers lower bills and be more efficient. In fact, it is just the opposite – mandatory minimums only guarantee to stabilize the utility’s revenue while removing options for saving. JEA is clearly on the hunt for more stable revenue
In short, these demand charges create new mandatory minimum fees and will hurt the families, low income and fixed income elderly customers in Jacksonville. The new rates also reduce the actual electricity rate you pay making it uneconomic to make energy efficiency improvements like installing LED light bulbs or new appliances as they will have virtually no impact at lowering your overall energy bill once you get hit with the higher minimum charges. Additionally the proposed new rates make it impossible to install rooftop solar economically.
The primary goal -- hidden in the rhetoric is clear -- curb the utilities falling revenue presented in the March 2016 board meeting. The utility has reported revenue per customer and total kilowatt hours sold were both down. A looming problem for inefficiently run, debt laden, utilities like JEA. A problem that Warren Buffett points to as a big problem for utilities.
Consider this -- there are other proven rate designs that would encourage efficiency by up to 20:1 without significant impacts to the elderly and low income customers. Unfortunately, smarter rate design would result in even more reduced revenue and as previously reported Jacksonville is already losing plenty of utility revenue.
The Jacksonville board is on a 60 day rush to drastically change rates, to an unproven model, and customers need to stand up and be heard!
Mandatory Minimum Fees Hurt Everyone but The Utilities Bottom Line
What’s more -- demand charges are nearly impossible for the average person (household) to understand. Demand charges represent your highest peak usage in a single hour – in a single month. Still don’t get it – don’t worry you’re not alone – That is primarily why these fees are rarely used in residential settings.
Demand charges work something like this. You decide to have a sleepover party for one of your children’s birthdays – You don’t have eight kids, you have two, but the spike in energy use that Saturday in the beginning of the month signals to the utility you "demand" the energy of eight kids in the house and the that party will silently haunt you for the whole month until your bill from JEA arrives. Then without warning you may have a $100.00 minimum charge on your bill.
Did your elderly mother on a fixed income have a handyman do some work at the house recently? She’ll find out how much energy his plug-in drill and shop light “demanded” in energy used later that month.
Worse yet families have very little control over their demand because their schedules tend to group power consumption together. Think about your morning routine. Did you use your hair dryer at the same time your husband used the toaster and your daughter turned on the microwave – wait was your daughter in the shower too during that same hour? Don’t worry, you’ll find out at the end of the month when your JEA bill arrives with an extra $100.00 in mandatory minimum charges.
None of these options provide the customer with an incentive or clear signals on how to lower energy bills. Parents can't tell the school they have decided to send the kids in later to avoid peak charges. Employers are certainly not open to the idea of people coming in earlier or later to help curb their energy bills at home.
These mandatory minimums are a penalty that benefit the utility. Once you’ve hit a peak amount for the month there is no going back and due to the lack of supporting technology there is really no way for you to tell what it was that cause the peak – so you don’t even know how to change.
Changing The Rate for Solar Discourages Customer Choice
In addition to proposing new mandatory minimums on all customers – The utility wants to lower the rate which it compensates solar customers for their occasional excess power. Customers who can no longer save by being more efficient might seek to switch to solar as an option to lower their bill, gain control of their energy and be a steward to the environment. The utility is proposing to eliminate that option as well.
Fact is -- there is not a single regulatory body in the country that has approved a rate structure similar to this and infact have denied larger investor owned utilities the ability to charge customers in this way. Utilities that have implemented this change have been approved by small municipal board members who have very little consumer protection oversight and usually very little understanding of how rates like this effect the customer negatively. That is why it is important for customers to take action and speak up and tell the board to reject these changes.
For example, Salt River Project, an Arizona municipal utility without any governing body made a similar move. The result has been an immediate decline in solar applications by 96% and customers are are forced into higher electric bills with little to know economic choice to lower them. Much like in Jacksonville, these customers in Arizona, don't have another choice of utility provider and are stuck with the decision.
The bottom line JEA is proposing making solar so unattractive to customers while trapping them into the higher mandatory minimum demand charges -- eliminating the further risk that customers will choose solar or make energy efficiency improvements.
All Signs Point to Future Runaway Utility Rate Hikes
The rush to switch customers rates is clearly a sign of more financial problems at the utility that the CFO is trying to protect the business from. So what happens once you have secured more revenue per customer and created an unfair disincentive for those customers to switch to solar or use energy efficiency? Raise Rates and fees, of course.
JEA’s clear next move – massive rate hikes and fees to replace lost revenue to service debt and to fund other unfunded liabilities within the City's jurisdiction. The utility is already looking to using the utility customers to fund city pensions and other projects not related to utility bills.
It doesn’t seem fair but outside of the jurisdiction of the Florida Public Service Commission the municipal utilities maintain much control over their rates and services. This can be great for residents when properly controlled. In the case of JEA it looks like the utility is looking to squeeze every last dollar out of the residents of Jacksonville, rather than seek out more efficient business operations.
The only thing you can do is make your voice heard. Take action now and tell the JEA board you do not want these mandatory minimums and want to maintain fair, full retail rate, compensation for solar.
(In all fairness to Melissa – her job as CFO is to protect the utility revenue, cash and expenditures – not the customer – and if these rates pass she will have done a great job at ensuring the utility's legacy business model remains unchanged)