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Monday, January 25, 2010

Your Electric Bill and the Customer Charge

With the cost of electric power higher than it used to be, combined with the cold weather causing most of us to use a lot more of that expensive power, some folks are scrutinizing their bill a lot more than ever before. That must be the case because we have gotten a lot more questions lately about one item which appears on all electric bills issued by us – the Customer Charge.

On your residential electric bill, this charge is presently $10 per month. If you have a small commercial account the Customer Charge is $15 per month and if you have a bit larger commercial account it is $45. Bigger businesses have correspondingly larger monthly Customer Charges.

Most folks want to know why this charge appears on the bill at all, and hopefully, this blog post will answer that question. The short answer is that the Customer Charge is designed to pay the expense associated with the fixed cost of delivering electric power to a home or business. The energy charge portion of the bill (expressed in kWH and/or kW demand) is designed to pay for the actual energy we purchased for you from TVA.

The fixed costs associated with delivering electric power to you each month include a long list of things that have nothing to do with the actual volume of electric power you purchase each month. Those things include: cost of the meter, service conductors, transformer, and other plant that serves your home or business; the cost of reading the meter, producing, and mailing the bill; the cost of owning the trucks, tools, equipment and paying the personnel necessary to maintain your electric service; the cost of tree trimming and storm damage repairs associated with maintaining service to your home or business; and the cost of tax equivalent payments to local schools and governments.

After considering that list of things that cost money but are not associated with the number of kilowatt-hours you use each month, it becomes pretty clear that the Customer Charge is actually much smaller than it really should be. For many years, by popular demand of the customers, kWH charges have actually been kept a bit higher than they really ought to be because customers just did not like the idea of paying a larger fixed charge, and that has always confused all of us in the electric power business. An appropriate Customer Charge protects the average electric consumer from subsidizing the unusual customer that maintains an electric service at a location that uses a very small amount of energy. If there were no Customer Charge at all and if the EPB collected all of the revenue necessary to maintain the network through kWH charges, then those who just wanted a service maintained for their convenience though little energy is consumed, would get that service virtually for free, paid for by all of the normal customers. It amazes me that anyone would favor such an unfair system.

We are all accustomed to paying our car payments for the right to have a car, whether we use it or not, and paying for our gasoline depending on how many miles we drive. The same philosophy should be customary for electric power. The Customer Charge is equivalent to the car payment and the kWH charge is equivalent to buying gasoline for the car. Hopefully, this will help everyone to understand why there are the two charges on the monthly bills from EPB.


Lunarwarrior said...

Almost sounds like each person is an extremely small owner of the company with the customer charge. Is there a profit every year that pays bonus or dividends? Each person should get a slice of the pie since we miniscule owners. I think $10 a month for years bought alot of stock options...

Billy Ray said...

Actually each customer is an owner of the EPB as it is a municipal corporation wholly owned by the City of Glasgow. The EPB is non-profit and pays its dividends in lower rates than available from for-profit corporations.

The $10 per month simply helps pay for the costs as identified in the original post.

Lunarwarrior said...

Ouch. City owns the EPB? Hope everyone pays there taxs. Sure hope city council doesnt set the rates!!! haha. just joking. you all do a great job. just looked good thinking I owned a piece on the monopoly board.