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The state’s largest electric utility wants to move its residential customers to demand rates, a controversial mechanism that critics say would mean higher bills for many ratepayers.
Arizona Public Service has previously indicated its support for demand rates through a case involving another electric company, UniSource Energy Services.
APS confirmed today that it intends to ask the Arizona Corporation Commission to approve demand rates for its customers when it files a rate case on June 1.
The proposed change in rate design would move all residential customers into a three-part rate instead of today’s standard two-part rate. The three-part rate would add a demand charge, under which customers’ electricity bills would depend on their use of power during peak times.
Typically, customers pay for energy based on their total monthly power consumption.
Opponents have called demand rates confusing and punitive.
“This pricing scheme isn’t practical or logical for most people with busy lives or more important things to worry about,” the Arizona Public Interest Research Group said in an opinion piece.
In APS’s case, the utility would assess a demand charge based on the highest usage during any one-hour period throughout the month, APS vice president of regulation Barbara Lockwood explained to the Arizona Capitol Times.
“It is a fairly forgiving period… It’s not an instantaneous measure, which is another myth that’s being propagated out there,” Lockwood said.
UniSource earlier abandoned its plan to seek demand rates for all customers after intense scrutiny from solar advocacy groups, AARP, and customers. Several hundred customers showed up at hearings organized by the Arizona Corporation Commission across the state to express their opposition to demand rates.
UniSource said instead, it will ask the commission for demand rates for solar customers only and provide optional demand rates for non-solar customers.
Lockwood said APS doesn’t have any trepidation about pursuing demand rates after UniSource’s withdrawal. She noted that APS already has about 120,000 customers on demand rates.
“We have a lot of experience. We are in a much better position… We believe that we will make our case and that we’ll make it effectively,” she said.
APS has started running advertisements showing how customers could adjust their power use to save money on demand rates. In one ad, the company shows appliances, like a dryer and oven, being used at the same time, and then how shifting to using one major appliance per hour could lead to savings.
Standard residential customers wouldn’t need any new technology to adjust to the proposed demand rates, Lockwood said. Instead, simple techniques like shifting to off-peak hours or staggering the use of appliances would help save money, she said.
“The majority of customers will see a very similar bill in moving to demand rates, even if they change nothing. But it gives you the opportunity, if you want to, to spread out your usage and lower your bill,” Lockwood said.
Our home has operated with a demand rate plan for several years. Seems pretty simple and the right thing to do. Rate plans help shift some of the flexible demand (clothes drier, dishwasher, pool pump, etc.) to off peak hours and in return you get a lower bill. Not sure why all the fuss.
If demand rates are better for residential consumers, why does APS seek to make them mandatory? If demand charge rates are better why do only 10-12% of APS residential customers use them now, years after they have become available? Adding a third major charge to monthly bills, in addition to the current fixed customer charges, reduces a residential user’s ability to effectively manage the cost of their electricity to 1/3 of their bill, the charge for the amount of electricity they use. APS’s proposal means consumers will have to watch their residential use five hours each weekday – that’s 20 hours a week, 80+ hours a month. If APS proves it needs more money, the increase should be added to the cost of the electricity itself, not an unpredictable mandatory demand charge. That way fixed-income residential consumers have the best change to control their electricity bill. – Steve Jennings, AARP Arizona Associate State Director
Demand rates are very logical and make a lot of sense for managing your power consumption. But if we give APS the right to charge a demand charge, we should get the right to pick our generation supplier. In other words, if APS wants to unbundle the electric rate, then we should be able to choose from whom we buy our bundles.