What the Heck Is Happening to my Electric Bill?

Have you noticed some changes to your electric bill recently?  Maybe you’ve just. chalked it up to normal increases in everything, or to variability due to the weather? It turns out to be a little more than that.  Last fall the Michigan Public Service Commission approved a request from Consumers Energy for a rate increase (there were also some other changes related to renewable energy that discourage residential solar projects).  Consumers is calling this “Updating our Standard Electric Rate”, but it is a rate increase nevertheless.  The new rates went into effect in the January billing.

If you look closely at your electric bill, you will see that there are a number of items in small print that all are charged to you for each kilowatt hour (kWh) you use. The first one is called “Energy Charges”, which has increased from 9.6781 cents to 10.0496 cents per kWh, a modest increase of 3.8%.  The others, called “PSCR”, “U20697 Deferral Surcharge”, “Distribution”, “FCM Incentive”, and “Power Plant Securitization” all increased from last year’s rates too.  The new total is 16.9 cents per kWh, a whopping 19.1% higher than last year’s 14.2 cents.

Oh, and that’s not all. The MPSC also approved a surcharge called “Peak Pricing” that will be in effect from June through September, the prime air conditioning season. Under this program, your rate will increase by 50% during the hours from 2:00 pm to 7:00 pm, in order to discourage electric use during the peak period of demand.  Consumers tells us that “by shifting when you use energy…  you can save on your energy bills”, and that “The good news is, most customers will see less than a $2 impact on their bill if they do nothing.”. That is to say, if you don’t air condition during those hours, you won’t have to pay the 50% surcharge on that energy over and above the 19% increase from last year. You will still be paying the surcharge on all other electricity you use.

The reason for all this?  It turns out that when the electric demand peaks during summer air conditioning season, the electric companies have to fire up additional (often older and inefficient) power plants to generate enough electricity.  Also, by shaving the top off the peak demand curve, the utilities can avoid building new generating capacity. By reducing our electric demand, we are all contributing to reduced CO2 emissions and air pollution – this is the real good news.

So, can you do anything?  If you have a smart thermostat (connected to the internet) you can sign up for Consumers’ “Energy Savings Events”, where they take control over your thermostat settings for about 5-6 hours on extremely hot days, first cooling your house down before the peak rates begin, and then raising the thermostat setting during the peak period so your air conditioning will work less.  You can also program your thermostat or manually change it to do the same thing.  And to further avoid the surcharge, you can refrain from doing high energy use tasks like washing and drying clothes and dishes during the hours from 2 to 7 pm, June through September.

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