Balancing the books on our backs

Seth Heald

Customers of Rappahannock Electric Cooperative could be in for a shock when they open their bills next year. In a filing with Virginia’s State Corporation Commission, REC seeks to double its fixed monthly access charge, which all customers must pay, regardless of how much or how little electricity they consume. REC announced its rate filing in the July issue of its magazine Cooperative Living but failed to mention the proposal’s key feature — the access-charge doubling. In its August issue REC finally mentioned the doubling, but that issue arrived too late to allow customers to weigh in on the plan by participating as parties in the rate case.

What REC has not told its customers is that doubling their monthly access charges is a major rearrangement of how the co-op allocates its rates among customers. The changed structure favors customers who consume large amounts of electricity over those who use less. Customers with low monthly usage will see their bills increase by a far higher percentage than their fellow co-op members with high consumption.

Most of REC’s low-consumption customers are people of limited income, including many retirees. Limited-income customers reduce electricity consumption to keep their bills affordable. They now find REC, inexplicably, working against them. The American Association of Retired Persons (AARP) has opposed rate-restructuring efforts like REC’s that increase fixed monthly charges. Joining AARP in fighting utility fixed-charge increases are the NAACP, Consumers Union, and the National Law Center. All these groups point out that increasing fixed fees, as REC has proposed, makes it harder for customers to control their monthly bills. State regulators across the country have agreed, often rejecting or scaling back utilities’ proposals to increase fixed monthly charges.

But it’s not just low-income customers that REC’s new rate structure treats harshly. All customers who try to reduce their electricity usage are penalized. This includes customers who reduce usage through more efficient lights or appliances or insulation, as well as customers who supply part of their own electricity with solar panels. These customers would be penalized even though they help the co-op reduce fuel costs, pollution, and the need for costly generating capacity. Also disfavored are customers with low usage because they heat with non-electric sources such as wood, propane, or oil.

In a Sierra Club filing in REC’s rate case Melissa Whited of Synapse Energy Economics notes that the co-op could raise needed revenues without disproportionately favoring one group of customers over another. Whited points out that REC’s proposal, by favoring those who consume more over those who consume less, gives price signals that promote waste in electricity consumption. This conflicts with REC’s efforts to reduce the co-op’s costs, including costs of expensive energy at times of peak usage.

Customers whom REC has targeted should feel betrayed by their co-op’s move to balance its books on their backs. How did this happen? We can’t know what the board considered in approving the proposed rate restructuring, because it meets behind closed doors. That’s contrary to the principle of openness that ought to govern co-ops with a state-sanctioned monopoly. A co-op’s customers, after all, own the firm. (REC will provide meeting minutes to co-op members on request, but the meeting minutes don’t provide details of board deliberations.)

REC’s insular, secretive board culture is a major part of the problem. It shuts out dissenting views and allows management to control a pliable board. Unlike REC, some electric co-ops open their board meetings to all co-op members and provide board members’ contact information on their websites. REC’s board sets its own (generous) pay behind closed doors. The board a few years ago even blocked a co-op member’s effort to require disclosure of each board member’s total annual pay. With that sort of cavalier attitude toward the co-op members who pay the board’s compensation, it’s easy to see how REC’s board could be oblivious to how its actions harm lower-income customers.

Virginia Attorney General Mark Herring, through his Office of Consumer Counsel, has intervened in REC’s rate case. REC’s low-consumption customers should hope that the Consumer Counsel will seek to block the co-op from implementing an ill-advised rate restructuring.

Seth Heald, of Rixeyville, is a member/owner of REC. He received an MS degree in energy policy and climate this year from Johns Hopkins University and serves as chair of the Sierra Club Virginia Chapter.

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