The South Carolina Electric & Gas method of calculating customer charges based on 15-year average temperatures should be discontinued because it is confusing and bills are unpredictable, the state Office of Regulatory Staff said Friday.
The Weather Normalization Adjustment rate structure is so complicated that neither the company’s customer service representatives nor ORS staff can explain it, consumers complained.
“It’s not understandable. That’s the biggest issue that we have with it,” said Dukes Scott, ORS executive director.
Customers are unsure how to manage their energy consumption because of uncertainty about how much it will cost. “There is no stability or predictability in the rates,” ORS said in a report on the issue.
ORS recommends that SCE&G weather-adjusted bills be phased out by the end of next month. More than 500,000 residential and commercial customers are affected.
SCE&G is not bound to follow the recommendation, which goes to the state Public Service Commission for its consideration. The PSC governs utility rate changes.
“I would think that the PSC would want to see the reaction of SCE&G. Ultimately it will be up to the Public Service Commision,” Scott said.
“We are going to be working with the ORS to address its recommendations,” said SCE&G spokesman Eric Boomhower.
The ORS report was not totally unexpected, he said, and SCE&G is aware of the complexity of the weather factor in customer bills.
“We are listening to what our customers are saying,” Boomhower said. “It is a complicated program, and I think that’s what really more than anything has fueled the questions.”
Consumers have saved $25 million on electric bills since the program was implemented in August 2010, he said.
“Clearly the reason why we got into it was to try to reduce the weather-driven volatility in customer bills,” Boomhower said.
The company has benefitted, too. In its annual report for 2012, SCANA says that the WNA program “largely mitigates the impact of weather on electric (profit) margins.”
The SCANA report also notes: “Mild weather in the future could diminish the revenues and results of operations and harm the financial condition of the company and Consolidated SCE&G if the WNA is not extended on a permanent basis.”
ORS said the system is worrisome because only SCE&G can generate and verify the WNA factor for electricity. The method for computing it includes “statistical regression” equations and 20 separate cycles for each billing month.
“Multiple customers have expressed concerns over the lack of transparency and understandability of the WNA and, consequently, a lack of public acceptance,” the report says.
The American Association of Retired People South Carolina applauded the ORS report. “AARP members complained to us about the unfairness of the WNA. We thank the ORS for their due diligence,” said State Director Teresa Arnold.
Stephen Suggs, an attorney with S.C. Appleseed Legal Justice Center, welcomed the ORS findings. “The program is too complicated and makes it impossible for consumers to evaluate the effects of efficiency efforts,” Suggs said.
Customers are subject to a weather normalization adjustment on their electric bill even if they are using gas to heat their home, he said.
Arnold said the best way for customers to handle extreme highs and lows on their power bill and to better plan for monthly expenses is to enroll in SCE&G’s budget billing plan.
SCE&G says WNA was implemented to minimize the impact of extreme fluctuations in weather, both on customers and the utility. When temperatures are unusually hot in summer or abnormally cold in winter and energy use spikes, rates are decreased. Alternatively, when summer is cooler than usual and winter warmer than expected, the charge per kilowatt hour increases, the utility says.
ORS concludes that by lowering the rate charged in hot months, the WNA further strains the power grid by removing the incentive to save power in the summer.
The WNA rate structure was implemented in August of 2010.