COLUMBIA, SC — Mother Nature dealt South Carolina Electric & Gas customers a tricky hand this winter.
Right after the utility ended a controversial program aimed at blunting spikes in electric bills caused by weather extremes, the state got some of its coldest temperatures in recent years and an ice storm for the ages. As customers cranked up the heat to stay warm, many saw the most severe spikes in their electric bills that they have seen in recent years.
Although it wasn’t designed to save customers money, the Electric Weather Normalization adjustment program that ended last year saved customers $23 million over its four-year life, SCE&G officials say.
However, ratepayers may not be clamoring for that program’s return. Amid widespread customer complaints and calls for reform, in particular from senior citizens on fixed incomes, the Public Service Commission ended the program at the end of December, saying it used a complicated formula that was not transparent to consumers.
Now, starting with the hard winter of 2014, SCE&G ratepayers are paying higher – and sometimes lower – electric bills that reflect Mother Nature’s mood swings.
As a result of the cold weather and other factors, SCE&G customers used 8 percent more electricity in the first quarter of 2014, compared to the same period last year. In part, because of end of the normalization program, those customers paid 16 percent more for electricity during that same period.
The normalization program
SCE&G said it developed the now-defunct weather normalization program to help protect its customers – residential ones, mainly – from spikes in their electric bills associated with extremely hot or cold weather. Under the program, SCE&G lowered the cost of a kilowatt hour of electricity when temperatures varied greatly – either much higher or much lower from their 15-year averages. On the flip side, the cost of a kilowatt hour was elevated during times of mild weather, when bills normally would be lower. The utility serves about 568,000 residential customers.
The decision to implement the program came on the heels of the harsh 2009-2010 winter season, the utility said, then recorded as one of South Carolina’s worst.
When temperatures got cold and SCE&G customers characteristically used more electricity, the program was supposed to smooth out the higher monthly costs of the increased usage.
“It was a complicated formula, but it was a good formula, we believe,” said Kevin B. Marsh, SCANA chief executive and chairman, commenting on the company’s weather-normalization effort. “We think it worked effectively.”
For example, SCE&G ratepayers avoided having to pay nearly $100 million in electric bills in January 2012 because of the normalization program. However, those charges were recouped by the utility during mild weather.
“When the weather got mild and there were adjustments to the bills – increasing bills rather than reducing bills to bring them back to normalized weather – many customers became dissatisfied,” Marsh said.
Now, without the program, customers pay for what they use.
SCE&G shuns year-over-year quarterly electricity rate comparisons, in part, spokesman Eric Boomhower said, because many variables can affect electricity use, including the severity of the weather, growth in customers and industrial expansion.
However, during the first quarter of 2013, when the weather-normalization program was still in effect and the weather was milder than normal, SCE&G’s electric customers bought 5.07 billion kilowatt hours of electricity, which generated $583 million in operating revenue.
In the first quarter of 2014, after the normalization program had ended and temperatures were colder than normal, including during the two-week ice storm, SCE&G users purchased 5.5 billion kilowatt hours of electricity at a cost of $678 million.
“Just like every other utility, when your weather is colder or hotter than normal, your revenues go up, and when it’s milder than normal, your revenues go down,” Boomhower said. “What the (weather-normalization program) did is, (it) gave stability to both the utility, in terms of operational revenue, and to the customer, in terms of taking those weather-driven peaks out of their bills, or at least, reducing the impact of those peaks on their bills.”
Consumers can opt in to a separate program that averages their bills throughout the year.
“The very best way for consumers to budget for their power bills is to take advantage of their utility’s budget billing, which basically charges you the average of your monthly bills,” said S.C. director Teresa Arnold. “For instance, I pay about $160 a month with Fairfield Electric. My January bill was $330, but I still paid only the $160. My April bill will probably be around $100, but I will still pay $160. That is easier to budget for, and we can understand it as the numbers are all right there on your bill.”
SCE&G said it also has done a lot of promotions to help customers understand their bills still can be averaged out over a 12-month period, in the absence of weather normalization.
“I encourage people that are having challenges with their bills to call our customer service representatives,” said Marsh, of SCANA. “We have a number of ways we think we can work with them to help manage those costs, because they are very steep in the first quarter of the year.”