A reality based independent journal of observation & analysis, serving the Flathead Valley & Montana since 2006. © James Conner.
One sure sign of spring for the last several years has been an increase in the Flathead Electric Cooperative’s rates. This year’s increase is 2.6 percent, but since 2010, FEC’s residential rates have increased 20–25 percent depending on how many kilowatt hours per month one buys. As FEC is a nonprofit, this is a pass-through of wholesale costs, done in several small increases instead of one whopping increase.
The charts and paragraphs below will display the customer’s true cost per kilowatt hour — your monthly payment divided by how many kWhrs you used — for FEC, the state’s largest electric cooperative, and Northwestern Energy, the state’s largest investor owned utility that serves the territory once served by Montana Power. FEC and Northwestern have different rate structures; at low monthly kWhr totals, Northwestern electricity is less expensive.
First, because FEC does not (but should) present a rate history on its website, here are the rates for residential single phase service since 2009:
In the world of electric utility cost accounting, the fixed monthly base charge covers the cost of distribution; that is, put simply, the wires. The per kWhr charge covers the electrical energy; the juice. FEC has an ascending block rate structure and a $22.71 per month base charge. Northwestern Energy, which serves the territory once served by Montana Power, has a single block per kilowatt hour rate and a $5.25 per month base charge. The practical effect, as shown in the chart below, is that for less than 334 kWhrs per month, Northwestern’s true cost per kWhr is lower than FEC’s, while the reverse is true for more than 334 kWhrs per month.
FEC’s base charge raises the true cost per kilowatt hour (your monthly bill divided by kWhrs used that month) by approximately 50 percent for the lowest cost block. That rankles me personally, as I often keep my summer consumption below 500 kWhrs/month — and end up with a true cost per kWhr of over ten cents.
Here is the percent of your bill that’s the base charge:
The whole cent breakpoints for the true cost per kilowatt hour:
The whole cents per kilowatt hour breakpoints for the 1–600 kWhrs/month block:
By disguising how high the true cost per kWhr has become, FEC’s high base charge accomplishes several things:
As I’ve noted before, electric utilities get away with the fixed base charge plus the variable energy charge because they’re natural monopolies. But it’s not necessary. When did you last refuel your automobile and pay both a charge for using the pump and pipelines, and a per gallon charge for the gasoline?
Independent analysts are beginning to rethink the wisdom of fixed charges for electricity, and especially the wisdom of high fixed charges. A recent study at the University of North Carolina concluded that a “softer” rate structure had advantages, especially for net metering.
