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.