Why are utility rates rising?

Utility Rates:   Many citizens are asking the following questions:  

Why are they going up?

Why is there a profit transfer from utilities to the general fund?

What is the demand charge and why is this being added to my bill?

Costs for pretty much everything have been rising.  Gas, groceries, items at the hardware store, you name it.  As far as utilities go, the cost of the commodities that the department buys have been increasing.  The cost of labor is increasing, and the cost of materials has been increasing.  Not too many years ago, the Department of Public Utilities spent more than the revenues brought in, to the tune of ten million dollars or so.  They couldn’t collect as much as they spent because some of the utility rates were capped by statute.  Although the Department of Public Utilities has reserve funds that are for this purpose, the funds are mandated to be at a certain level.  The extra money that the DPU spent depleted these founds and the DPU began strategizing how to both replenish these funds and to pay for the increased cost of the commodities going forward. The DPU, as with any business for that matter, cannot exist if it spends more money than what it receives.

To make matters more confusing, there is something called a “profit transfer” that occurs.  This is a transfer from the utility accounts to the general fund.  I have asked about this and it has been described as a franchise fee.  It was further explained that this money is returned to the DPU for utility capital projects.  Nevertheless, on the surface, it doesn’t look good.  It looks like the DPU is making so much money that they have to transfer the extra money to the General Fund.  If this is the case, why would the DPU have to raise rates to be sustainable? 

The Board of Public Utilities recently voted to do away with the “Profit Transfer” because it does not accurately describe the situation.  Will it change anything?  No, because this money will now be spent on capital projects directly instead of going to the general fund and then being returned to the utility department.  I recommend that citizens vote YES on Ordinance 758, to remove “profit transfer” from the County Charter.

Customers will start seeing a “Demand Charge” on their electricity bills.  The “Demand” is the peak electricity usage, averaged over a one-hour period, for the month.  For example, a 30-day month consists of 720 hours.   Each of these 720 segments will have a power draw associated with it.  During the night, or when people are at work, the electrical draw will be pretty low.  If a family has a car charger, the demand of the car charger could be around 20kW.  If this car charger is on for one hour, and there are other loads that add up to 5kW for that same hour, the demand is 25kW.  The demand charge is $1 for each kW in the highest one-hour period.  In the above example, a $25 demand charge would be applied over and above the monthly electricity bill.  I voted against the Demand Charge, but it passed.