Madison Gas & Electric has scaled back its request for fixed rate increases after reaching an agreement with Citizens Utility Board, the state’s utility customer advocacy group.
The utility had come under fire after proposing a fixed rate increase for residential customers from about $10.50 a month to $21. Under the agreement that charge would go up to $19.
The monthly charge is made up of two components: a fee to cover infrastructure and operating costs and a grid connection fee. The grid connection fee is the source of the increase.
But more significantly, the utility agreed to suspend a “demand charge,” which is based on usage during the few summertime hours when there is peak demand, the point at which the electrical grid is utilized to full capacity. That charge could have pushed residential bills much higher.
MGE spokesman Steve Schultz said the changes are an attempt to prevent one residential customer from subsidizing another and to impose the same billing structure on residential customers that has been in place for commercial and industrial customers for decades.
“On the residential side, we’re trying to set up a rate structure just like the large customers have, where customers will pay what it takes to bring electricity to their home, everything from the overhead all the way to the actual energy charge,” Schultz said.
The agreement doesn’t mean residential customers are off the hook for the demand charge. The agreement will be in place only through 2015.
“We’re going to study that to take a look at 2016 and beyond to see how we might do that, but right now the CUB agreement basically takes care of 2015,” Schultz said.
The fixed charge increase OK’d in the agreement would be an increase for residential customers of about 28 cents a day, from 35 cents to 63 cents, an 80-percent increase.
At the same time, MGE is proposing a slightly lower rate for actual electricity usage, although the exact amount of the decrease is still being worked out.
“For the majority of our customers, essentially there will be no impact on their bill,” said Steve Kraus, another MGE spokesman. “It’s just shifting the cost.”
The utility has taken flak in the weeks since asking for the rate increases for creating a disincentive for energy-saving measures, especially solar power. Critics said that combining fixed charge increases with decreases in the charges for actual power use reduces the financial benefit of installing solar systems.
The criticism hasn’t been exclusive to MGE. Other utilities seeking rate increases in the state have weathered similar criticisms.
But Schultz said, “MGE continues to support solar energy.”
He said the demand charge, which was suspended under the agreement with CUB, encourages customers to use less electricity during peak hours and therefore creates a financial incentive to employ alternative energy sources like solar.
“Restructuring our residential rates, that will hopefully send price signals to customers so that when it comes to that hottest day they can move some of that power” off the grid, he said. “Literally, sometimes just a few hours difference will keep us from reaching that new peak every year.”