The Omaha Public Power District is joining other utilities in proposing big changes to how its customers pay for electricity.
But OPPD would be moving down that path more quickly than others, and critics are warning that the plan would mean higher bills for the people who can least afford it.
OPPD leaders want to raise the flat monthly service fee for its 355,000 residential and small commercial customers while lowering the rate charged for actual electricity usage.
For OPPD’s residential users, the service fee would increase from $10.25 to $35 in steps over the next three years, and the per-kilowatt-hour usage rate would drop 28 percent.
Utilities across the country are following a similar playbook as they adapt to a changing market: OPPD says it has identified regulatory filings from 80 U.S. utilities that want to raise service fees, including the Lincoln Electric System.
“At the very least, more utilities are investigating these strategies,” said Paul Zummo, manager of policy research and analysis for the American Public Power Association.
The issue stems from steadily improving energy efficiency in consumers’ homes and appliances. People are using less electricity, becoming more conscious of their energy footprint and, in small numbers, starting to generate their own power with solar panels or backyard windmills.
That eats into the revenue flowing into utilities, which traditionally relied on strong, steady growth in energy consumption.
Right now, 90 percent of an OPPD customer’s bill is based on variable usage, which means some low-use customers aren’t covering the cost to deliver electricity to them, OPPD officials said.
With revenues flattening or declining, it makes sense to raise monthly fees to ensure that this cost is covered, said Tami Monroe, OPPD’s division manager for business planning and analysis.
“The longer we wait to make this type of change, the more consumers will make decisions that are based on an outdated pricing structure,” she said.
But the restructuring plan has drawn sharp criticism because it penalizes low-use customers: apartment-dwellers; customers who generate their own power; people who conserve energy; and poor people. Six in 10 low-income customers would pay more under the new rate structure, according to OPPD estimates.
The impact on low-income customers is one reason OPPD is looking to phase in the changes, said the utility’s CEO, Tim Burke. OPPD would delay the changes until June to allow more time to expand assistance programs.
[Have an opinion on OPPD’s rate restructuring plan? Leave your feedback at oppdlistens.com.]
Mary Bamesberger, a former schoolteacher who lives alone in a 991-square-foot home in Millard, is one OPPD customer who might need some help.
In 2012, while recovering from cancer treatment, Bamesberger started to chip away at her power bill — installing a programmable thermostat, buying more efficient appliances and watching her usage closely.
It was partly a matter of prudence, partly out of concern for the environment. Mostly, though, she was looking for ways to stretch her monthly Social Security check.
According to bills she shared with The World-Herald, Bamesberger has nearly halved her average power bill. In 2012, the bill covering a period in July and August — typically her highest — was $107.83. This year, it was $58.31.
Under the new rate structure, she would pay about 30 percent more for the same usage. Bamesberger, who turns 71 in December, said it’s not fair that OPPD would penalize her for conserving energy.
“I was doing what I was supposed to do,” she said.
She said she’s already cut back her meager expenses and isn’t sure how she’d cope with higher bills.
“I guess I’d have to apply for assistance. … They’re saying: ‘We need this money. (This plan) works for us.’ But I need that money. It doesn’t work for me.”
At last week’s OPPD meeting, Kay Carne, an accountant and senior associate at environmental consultant Verdis Group, urged the board to reconsider a plan that “is literally going to take money from those poor people and put it in the hands of the wealthy.”
“This is a really bad thing,” Carne said. “Please, please do not do this.”
Board Chairwoman Anne McGuire said after the meeting that she shares those concerns, too, and that board members will take them into account. Nothing is set in stone, McGuire said.
“We’re looking at this very carefully,” she said.
If the restructuring plan is approved, customers who use less electricity than average would pay more. People who use more than average would see their bills go down. An average user who pays around $100 a month wouldn’t see much change. Most customers would see a variance of less than $15 a month — either higher or lower — compared to their current bill, Monroe said.
The district is gathering feedback on the restructuring plan and encourages customers to submit comments ahead of a board vote next month.
Other utilities are taking things slower. Most members of the Large Public Power Council, a trade group that includes OPPD, charge residential customers a fixed customer fee around $10. A few have recently raised their service fee, or are considering raising it, but the proposals are more modest.
Seth Nowak, an analyst at the American Council for an Energy-Efficient Economy, which opposes this kind of rate restructuring, said a $10 service fee is typical for the industry. Jumping to $35 “would be unusual,” he said.
Lincoln Electric Service is raising fees more incrementally. Starting in January,the utility’s customer fee will rise from $11.15 a month to $13.40, and usage rates will come down 3.2 percent.
Laura Kapustka, Lincoln Electric’s chief financial officer, said a more cautious approach is warranted because the best way to allocate costs in the future isn’t clear.
The municipal power utility in Austin, Texas, went through a rate restructuring a few years ago. At the time, Austin Energy hadn’t raised its rates in 18 years and was suffering financially, spokesman Carlos Cordova said.
Cordova said the utility initially proposed raising the fixed charge from $6 a month to $35, for the same reasons: The bill didn’t reflect the actual cost to deliver power to each customer.
Customers weren’t happy.
“For a city that had been used to paying $6 for two decades, that just wasn’t going to fly,” Cordova said. “There was sticker shock.”
After extensive public input, the utility increased its fee more moderately, from $6 to $10. The utility also moved to a five-tiered rate system that charges high-use customers a higher rate than customers who use less.
Burke said OPPD officials examined alternatives but rejected them. A tiered rate structure, for instance, might not pass Nebraska’s statutory test for public power districts to be “fair, reasonable and non-discriminatory” in billing customers, he said.
Scott Williams, an energy technology professor who spoke against OPPD’s proposal last week, said switching to a rate structure that punishes low-use customers is not the answer.
“If you’re lowering bills for rich people and energy hogs, and raising bills for poor people and efficient people, maybe you need to look again at your definition of ‘fair, reasonable and nondiscriminatory,’ ” he said.
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