The Eugene Water & Electric Board in Oregon is preparing to move away from tiered residential rates in favor of a flat rate, a change the utility says would stabilize customer bills year-round.
Currently, EWEB customers pay 5.9 cents per kilowatt-hour for the first 800 kWh they use and then pay 7.4 cents per kWh when they use more. Under the revenue-neutral proposal set to be taken up by the utility’s board next month, residential customers would pay a flat energy rate of 6.5 cents per kWh. Customers also pay a $20.50 monthly basic charge and a 2.6 cents per kWh delivery fee.
EWEB adopted the two-tiered rate structure in 2003 after the western energy crisis, when it was having to buy high-cost electricity in the wholesale market, the public power utility explained.
“That tiered pricing structure no longer reflects our true cost for power,” EWEB said. “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.”
Shifting to a flat rate will alleviate the "sticker shock" about 60 percent of EWEB’s customers experience in the winter heating season when their electric use jumps, moving them into the higher-priced tier, according to the utility.
Also, customers didn’t know their electric use had pushed them into the higher rate tier until they got their electric bills, EWEB said.
EWEB said having a flat rate will incentivize electrification, allow the utility to showcase its virtually carbon-free power portfolio, and help the utility be more competitive with natural gas.
Instead of using high prices to spur conservation, it is more effective to use rebates and loans for efficient heating and cooling systems and weatherization projects, according to EWEB.
EWEB expects that some low-use customers may see their electric bills increase by $1 to $4 a month.
Next year will mark the fourth year in a row that EWEB has avoided electric rate increases.
The proposal grew out of a customer pricing committee that studied options for structural reforms in how EWEB recovers its costs, according to the utility. The committee recommended a gradual approach and endorsed the elimination of the second pricing tier, EWEB said.
In a July memo to EWEB’s board stated that all options involve trade-offs. “Pricing reform carries a high risk of public misunderstanding and elevated customer concerns about bill impacts to certain customer classes and/or consumption behavior,” the memo said.
EWEB said its proposed move is part of a utility trend towards having fewer tiers or having flat rates to stabilize their financial positions.
Utilities around the United States have been grappling with rate structure issues because of increases in distributed generation, such as rooftop solar panels, and low to flat growth. The rate structure issues range from time-of-use rates to demand charges.
EWEB, the largest public power utility in Oregon, has about 93,000 residential, commercial and industrial electric customers.