The Bills Have Eyes

Ever look at your electric bill and wonder, “why is this so expensive?”  Are you turning down your air conditioner to save money or double-checking that every light is off before you leave the house?  Ever wonder if you can lower you bill other ways?  In the next series of articles, we will examine your electricity bill, look at ways to cut costs, and explore solar as a viable option for cutting the cord.

The Bills Have Eyes

Have you ever looked at your electric bill? I mean, really looked at it. There’s a lot of information on that piece of paper (or if you’ve gone paperless–good for you–there’s a lot of information on that screen).   There’s information about how much energy you used that past month (obviously), your average usage over the year (hey, that’s nice to know), comparisons of your current month’s usage to past month’s usage (in case it was a colder than-average winter (2014/2015, looking in your direction…), and then there’s a bunch of fees?  Some examples of these fees on my bill are distribution charges, customer charges, a retail stability rider, and a deferred asset phase-in rider.

Wait. What?? A deferred asset what’s-it-now??

What are these fees and why are there so many of them just to deliver my electric?  I thought I just paid for whatever energy I used that month and maybe the cost to the electric company to deliver the energy to my house.  What’s all this other stuff on my bill?  Well, over the next few articles, I’ll help you navigate your bill, explore options for lowering you bill, and maybe make a good case for cutting the cord.  But let’s start with the bill.  And let’s start with the stuff you may already know. This I know: my electric bill last month was $98.56.

So in our area, before deregulation in the mid-1980s (Ohio deregulated energy in 2001), American Electric Power (AEP) held the monopoly on electricity.  But now you have the option of buying your electricity from anyone who can provide it to you. You may have seen mailers in the past few years trying to woo you away from AEP.  Many of those woo-ers promise a fixed rate. This is enticing because, just like the price of companies, the price of utilities fluctuates as well.

This isn’t an economics lesson, so we won’t go into market fluctuations or rate-fixing, but suffice to say if you haven’t investigated your rate options, you should check it out.  On my bill, I have a fixed rate from FirstEnergy of $0.0699 and used 566 KWH so that works out to $39.56.  Anyway, whomever you purchase your energy from, you’re still paying AEP for the infrastructure they laid down when they provided everyone their power years ago.  That is to say the lines, the poles, the easements, the guys in cherry pickers blocking the right lane of North High Street… that’s the distribution fee you see on your bill.  Even though you buy the juice from FirstEnergy or John’s Power or whoever is cheaper, you’re still paying AEP for the use of their hardware.  My distribution fee is $29.09.  So far I have the electricity I used last month for $39.56 and the distribution fee for $29.09 for a total of $68.65.

Um, okay.  So let’s break these fees down. Let’s start with full disclosure: these fees are defined on the back of your bill.  But I’m not a lawyer and I bet you aren’t either, fellow electricity-user.  So here’s the layman’s definition guide of fees you’re paying.

Customer Charge: That’s the electric company’s cost of doing business.  So if you get your bill mailed out or even if your neighbor does, that cost is spread out over all the users.  Just imagine if everyone went paperless.  That’s a lot of lonely stamps. On my bill, my customer charge is $8.40.

Retail Stability Rider:  Any “rider” is a temporary charge approved by the Public Utilities Commission of Ohio (PUCO).  The retail stability rider specifically is an approved charge that compensates AEP for the loss of business from the deregulation.  It’s like palimony you pay your ex-electricity provider.  Good news, though, the rider expires this year.  The charge for my retail stability rider is $3.01.

Deferred Asset Phase-In Rider:  This is the rider I lose sleep over at night.  This is the deferred cost, again spread out over all the users, for the fuel used to generate the power. *Shudder*  So basically, we are paying to light our homes in money and pollution.  We, as customers, are paying for the fuel it cost AEP to generate our power.  That’s like buying a ring and paying extra for the silver and the diamond instead of paying for the finished goods.  Except we don’t get a pretty ring in the end.  We get electricity for our homes (which one can argue is essential to life) and we get to pay for the fuel it cost to make that power.  But wait, there’s more! It’s actually the past fuel use we are paying for here.  How does this work?

Well, AEP could basically absorb the cost of creating the energy or they could recover past fuel costs by passing it directly to the customer. But that would be a lot of money to recover… gas is over $2.00 at the pump, right?  To minimize the impact on customers’ bills, the PUCO set caps on bill increases between 2009 and 2011.  That cap was 12%. PUCO then directed AEP to defer cost incurred above those caps for later recovery.  Now, AEP is collect the deferred fuel costs over a seven-year period directly from their customers. Mine is $1.42.

So the final tally on fess in addition to my actual energy use is $41.92. Take a look at your bill and see how your usage stacks up.