NOTE: The following analysis was developed in 2015, using CL&P (now Eversource) distribution rates and charges, in comparison with a $10 cap on the monthly fixed charge. While the numbers would be different for United Illuminating customers in 2016 (we would compare the current fixed charge of $17.25/month against the $7.63/month charge presented in expert testimony), the underlying principles and analysis would be the same.
High fixed charges take away residential consumers’ control over their energy costs – especially efficient users, those on limited incomes, seniors, and households with rooftop solar. The effect on a CL&P residential customer who consumes less electricity is unfair. Most of that customer’s distribution costs will be unavoidable due to a high fixed charge.
Capping the monthly residential fixed charge at $10, by itself, will have no impact on the amount of revenue received by the utility. PURA is charged with determining how much total revenue the utility needs in order to serve the public interest. Capping the fixed charge just provides guidelines for how that revenue is recovered from customers – i.e. the mix of fixed charges vs. variable charges.
If PURA were to decide to maintain the same level of total revenue, the impact on different customers (low consumption, average consumption, and high consumption) is shown in the graphs to the right.
The average customer would see no change in her total monthly distribution charges, while low consumption customers would pay less and high consumption customers would pay more. And since more than 80% of the high consumption customer’s distribution charges will be tied to the number of kWh used, he will have an even greater incentive to implement efficiency measures.
If PURA were to decide that the utility needs more or less total revenue, the variable rate would be adjusted accordingly. The graph below shows the impact on the three different types of customer arising from a 10% increase (green bar) or a 10% decrease (purple bar) in total revenue.
Note that even if PURA were to award CL&P a 10% INCREASE in total revenue, the low consumption customer’s monthly bill would be about 12% LESS than her current bill (blue bar).
Download a PDF file with the data used to generate these graphs.