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WV’s Dirty Little Electricity Secret

October 1, 2011

We hear media reports of electric rate increases in WV or power company claims that WV residential electric rates are below 10 cents per kilowatt hour.  We assume that this means that we all pay the same price for each kilowatt hour we use as residential customers.

Guess what?  We are wrong.

In fact, West Virginians all pay different electric rates, depending on how much electricity we use.  If your neighbor uses 1000 kwh per month, and you use only 300 kwh per month, you will pay much more per kwh than your neighbor.

All of this variation in rates comes from one number on your electric bill.  All residential customers of all WV electric companies pay a flat fee of $5 per month, in addition to the per kilowatt charge.  The more electricity you use, the more billable kilowatt hours you have over which to spread the cost of that $5 charge.

Here’s an example from my electric bill.  I am a customer of Mon Power, a FirstEnergy subsidiary.  My August electric bill stated that I used 214 kwh (It is low because I produce about 100 kwh per month from my solar panels.)  Mon Power says my per kwh charge is $.08722.  But I also paid the flat $5 monthly fee, plus a separate charge of $.75 (based on kwh usage) that Mon Power charges me.  The extra $.75 charge is called an “environmental control” fee, mainly for installing scrubbers on its coal fired Fort Martin power plant.  So here is the math, without the Fort Martin fee, to keep it simple:

(214 X .08722) + 5.00 = 23.66508             23.66508/214 = .1106 per kwh

I used 214 kwh, so I pay 11.06 cents per kwh, far more than the power companies and the PSC claim.

Now let’s do a similar calculation for a customer that the PSC and the power companies claim is the “average” WV residential customer who uses 1000 kwh per month:

(1000 X .08722) + 5.00 = 92.22                   92.22/1000 = .09222 per kwh

So the 1000 kwh per month user pays 9.22 cents per kwh.  I don’t know where that “average customer” 1000 kwh number comes from.  It is a suspiciously round number and I have never seen it change in the 35 years I have lived in WV.  That leads me to believe that the 1000 kwh figure is probably a fiction.  Over the years, I have seen WV reporters faithfully repeat this power company claim without once trying to verify the actual number.

When I use 214 kwh per month, I pay an electric rate that is 20% higher than a Mon Power customer who uses almost five times as much power as I use.

AEP’s WV subsidiaries, Appalachian Power and Wheeling Power, have rate structures that work exactly the same way, with one extra kicker.  AEP’s companies are allowed to charge that same $5 monthly fee, but the rates for their kilowatt hours are 9.604 cents/kwh  for customers who use under 500 kwh/month and 8.394 cents/kwh for customers who use over 500 kWh/month.  Not only do AEP customers get a discount from the $5 flat fee, they also get an extra discount of about 1.3 cents/kwh for using more than 500 kwh/month.

Considering that almost all of WV’s electricity is produced by burning coal, is it a wise policy for the state and the PSC to be giving volume discounts to customers (the discounts are even higher for commercial and industrial users) for a finite resource that is running out?  As we have seen recently, rising coal prices are the main cause of WV’s rising electric rates.  Appalachian Power’s CEO Charles Patton and WV PSC Chairman Mike Albert have both told WV electric customers to expect more rate increases caused by coal’s rising cost.  So why does the WV PSC allow power companies to charge rates that encourage more use when they know the cost of WV’s coal fired electricity is set to rise for the coming years, if not decades?  It is simply encouraging today’s electrical users to rob their grandchildren.

The PSC’s volume discounts put WV rate payers on a collision course with falling coal supplies and rising coal prices.  This is a real train wreck scenario that is developing right now.  It will only get worse, and cannot get better.

Here are some other issues raised by WV’s fundamentally unfair electric rate system:

  • If you are trying to reduce your electricity usage by increasing the energy efficiency of your home, you are automatically raising your electric rates.  As you use less electricity, you are paying more and more for each kwh you are still paying for.
  • If you invest in a solar power system and sell your surplus power back to AEP or FirstEnergy through net metering, the power you sell them from your system is the power off the “top” of your electric bill.   Those are the kilowatt hours that are the cheapest in terms of rates.  As with the customer who increases his/her energy efficiency, the rate payer who invested in renewable energy is left paying for electricity at even higher rates, after selling his/her “cheapest” kilowatt hours back to the power company.  So net metering isn’t really net metering after all.
  • Poor and elderly customers who don’t have the appliances and fancy gadgets that their wealthier neighbors own, are guaranteed to be paying higher electric rates than those neighbors who use more electricity.

I don’t have any easy answers to these questions, but we need to start talking about them.  We need to bring these fundamental issues of how we pay for electricity in West Virginia to the state Legislature, the WV PSC and the WV Consumer Advocate Division of the PSC.  Right now, we have a rate structure in WV that encourages waste, penalizes innovation by homeowners and business owners and charges poor and elderly customers more than their wealthy neighbors.

We all need to get smarter.  Read your electric bill.  Do the math.  Use the formula in this post to calculate your real electric rate.  We need to know the truth before we can figure out how to fix our broken system.  One thing is for sure, we have not been getting straight answers from the WV media, the power companies, or the WV PSC.

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13 Comments
  1. Cathy permalink
    October 1, 2011 4:41 pm

    Bill,

    Thanks for a great post! I am unclear on what rate you’re saying that customers with solar power are getting paid for their power. In your Mon Power example, is it $0.08722 (the per kWh rate), or that rate plus the environmental surcharge? Either way, I agree it’s unfair because the power you’re paying for is higher than either of those, thanks to the fixed cost …

    Cathy

    • October 1, 2011 5:00 pm

      Cathy,

      I revised my original version of this post to specifically exclude the environmental surcharge, which I describe as the charge for the Fort Martin scrubbers. Neither the Mon Power nor the AEP calculations include these extra charges, added to electric bills to cover measures designed to mitigate the health impacts of power company air pollution from burning coal. These extra charges are based on electricity use, and do increase customers’ electric rates proportionally. I did not include them to keep the calculations simpler.

  2. James Ratliff permalink
    October 4, 2011 6:18 am

    So your saying if you go on vacation and don’t use any electricity (0 KWH) for a month or two, your power company should come out and read your meter and continue to cover the costs of your meter and service drop for free? Or worse you want your neighbors to pay some of the fixed costs of your having electricity.

    • October 4, 2011 6:38 am

      Actually, I’m not saying that. What you are talking about is a minimum fee. That is different from a flat fee that is charged to all customers regardless of how much electricity they use.

      I don’t have any problem with a minimum charge that kicks in when kwh use falls below that minimum charge. That is perfectly legitimate. My questions only apply to a flat fee that is added onto customers who are using electricity regularly. The impact of charging a mixed fee, under the current system means that the fixed portion of our bills creates a volume discount. The WV PSC needs to be honest with customers about the impacts of the current system. The Commission should not be claiming to support lower electric bills and energy efficiency but support a rate structure that rewards people for using more electricity.

      The PSC can “justify” the flat “customer charge” any way they want, but the end result of the fee is that if you use more electricity, your rates go down. You can’t argue with the math.

  3. July 11, 2012 9:34 am

    FYI. I am charged $.09407 per kwh plus the $5 bae fee plus the Environmental Control Charge $1.81 in addition to having been greatly overcharged on an estimated bill. I am tired of subsidizing the salaries and bonuses of the Corporate lard butts in Potomac Edison (Allegheny had such bad reputation that it was changed)an First (Worst) Energy.
    Couple this with the way we have been treated by Becky Bruner of DAVIS TREMAINE, et al. in our efforts to obtain useful paperwork in advance of the “telephone conference” on 18 July, and we have a consortium of utilities that clearly has less than our best interests at heart.

  4. Shane Mac permalink
    July 27, 2012 12:27 pm

    I have been doing some research on “our bills”. We too have Monpower. We use 1000+ KWH a month and cant figure out why! We only have one small AC, small fridge, small deep freezer and a well pump! All lights stay off during the day and we are hardly ever home! I noticed some odd things on our bills! The bar graph they have on all the bills for usage in past months are always lower then the amount they say we used! For instance, last month, the actual meter reading was 1,323. The bar graph shows us using around 800 KWH. I would imagine that the graph should be “to scale”. I did actually go out and read the meter today and it read 2350. Last month was an actual reading of 1323. So we used 1,169 KWH this month. What I really don’t get, is the fact that our power was out for 3 day’s! Also, we went on vacation for another 6 days! All our appliances are fairly new (2 yrs or less)! We are going to start doing two readings a day! Once in the morning, then again in the evening to see how much we are using per day! I am jealous that you are only using around 300 KWH per month. Grrrrrrrrr

    • July 27, 2012 12:43 pm

      Shane,

      Air conditioners eat electricity. Also, how do you heat your water? Electric water heaters also draw a lot of power. Putting a timer on your electric water heater will save lots of money.

      If you really want to learn about how much electricity you are using, try one of the many plug in meters you can use to measure exactly how much power individual appliances are using.

      You can also get The Energy Detective to measure your power usage minute to minute. I have this set up, and it is really useful, but it is more expensive than the plug in meters, and requires a little more set up.

      If you have gas available, I would suggest that you switch to gas for as much of your needs as possible. Gas anything is much more efficient that electric, because you use much more of the heat from combustion, because it doesn’t have to be turned into electricity and sent over wires to your home. Our switch to gas appliances was the single biggest savings for us on electricity. We also have a house that sits back under lots of shade trees, so we use no AC. We have a unit, but have not turned it on this year.

      You can figure out your electricity usage, and I encourage you to do it. You are starting at the right place by reading your bill and seeing what your monthly usage is. Don’t stop there.

    • jose permalink
      June 11, 2013 12:59 am

      You should try new jersey or pennsylvania where I have my other house they charge you for generation charges,delivery charges, solar charges, at the end there are about 6 different charges so a 300 kwh usage might run you about 100 dollar bill

  5. jose permalink
    June 11, 2013 12:49 am

    I run my entire house on solar and I got let over power so I contacted Appalachian power in order to sell some power back. The told me that I needed to change my meter for one that is net metering and I had to send a 30 dollars non refundable so I received the form in the mail asking me basic information about my system I filled it all up and mailed with a 30 dollar check after that I received another form telling me that in oder to get a net meter I had to pay an electrician to inspect my house wires then to get a letter from the company how sold me the panels and on top of that I had to buy a 100.000.00 liability insurance and provide them with a copy ( liability insurance for that much runs about 500 to 600 dollars a year so I called them and told them that if I have to spend 600 dollars a year on insurance where are my savings sooo their reply was “those are our rules if you want to sell us power”

    • June 11, 2013 6:37 am

      Jose,

      Yes, those are the interconnection rules in WV. Your system has to be inspected by a licensed inspector and you need to have $100,000 in liability coverage. Do you have that amount of liability coverage with your homeowners insurance policy? If you do, that is all you need. You don’t have to buy anything extra if your homeowners policy will cover it.

      You are much better off if you research the WV PSC regulations FIRST, before you install your system. That way, you can meet these requirements, which are, as you point out in your other comment, pretty minimal compared with other states.

    • June 11, 2013 8:17 am

      Do you see why I call this political subdivision WEST CORPORAGINIA? If we had a legislature that represented people instead of damned corporations, we would have meaningful net metering instead of the garbage Jose described. Did the electric utility tell Jose that after jumping through all those hoops, he would receive only “CREDITS” to his utility account for the power put into the grid. If Jose does not use enough electricity in 12 calendar months to offset the “CREDITS,” he loses the “CREDITS.” Jose will never receive a check from any electric utility doing business in WEST CORPORAGINIA.
      I would like to repeat my FIVE POINT PLAN, which I introduced at the NAACP/ COALITION FOR RELIABLE POWER FORUM in Charles Town last month. The Points are:
      1) Increase the membership of the Public Service Commission to 7 members:
      3 appointed,and 4 elected, 1 from each Congressional District and one statewide
      at large. Should Congressional representation decline, the at large seats would in-
      by the same number. No more than one PS Commissioner may sit from one county
      at the same time.
      2) The Governor should put the LEAST COST ENERGY BILL on the next call for a
      special legislative session. (The bill “died” in Committee in the 2013 regular ses-
      sion.)
      3) Implement a meaningful net metering plan for actually compensating small con-
      sumers who generate power fed into the grid with the precise requirements speci-
      fied.
      4) County Commissions and County Councils will have authority to appoint a
      Utility Ombudsman to oversee, mediate and resolve billing disputes between
      subscribers and utilities.
      5) The West Virginia (Corporaginia) Public Service Commission must meet at least 8
      times per year, twice in each of the remote areas of the state, Northern, Eastern,
      Southern, and Western counties of the state.
      I am not holding my breath until this is received favorably.
      Danny Lutz 16th District Mountain Party

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