Started by Chuenchom Greacen
Oct 30, 2024
Oct 30, 2024
21
Should we be subsidizing the profligate power consumption of mansion owners?
Oct 30, 2024
By Chom & Chris Greacen
Our customer-owned electric utility, OPALCO, has voiced with increasing alarm: “blackouts are coming.”/1 Why? Coal and natural gas-fired power plants are being retired faster than we can add new wind and solar energy, and electric load is growing with the addition of new electric vehicles and power-hungry data centers. We are entering a new reality where electricity will be in short supply and the consequences for our electric bills may be painful.
For OPALCO, the biggest crunch time is when the mercury dips well below freezing and our heaters work extra hard to keep us warm and pipes from bursting. A cold snap in December 2021 led to a spike in power consumption that resulted in a $300,000 penalty/2 imposed by OPALCO’s wholesale power supplier, the Bonneville Power Administration (BPA), for peak consumption exceeding the normal range. This past January cold weather triggered a similar penalty.
To make matters worse, when demand spikes, BPA has to scramble to find extra supply in the spot market, where prices can be very volatile and can surge to 25 times the normal wholesale price./3
A problem is that there is a gaping mismatch between who causes the demand spikes and how much they pay to cover the system costs associated with peak demand. On 1/12/2024 when OPALCO’s system demand peaked, top 10 residential customers (“mansions”) were consuming as much as the bottom 19% or 2,308 customers! Similarly, the top 100 contributed as much as the bottom 29% or 3,489 homes. (See graph.)
Despite the deeply unequal contribution to the system peaks, OPALCO imposes the same fixed charge of $56/month that every other residential customer pays.
A fairer way to allocate costs associated with the peak consumption would be to use metered demand charge: the more one contributes to the system peak, the more they pay. If allocated based on peak usage, the top 10 customers should have been charged fixed costs of $167,000 per year, instead of the $6,720 OPALCO collected from the flat $56 per month access charge/4 - an underpayment of $160,000. Similarly, the top 100 customers collectively underpaid by $547,000. OPALCO recovers this shortfall by padding everyone’s energy charge. We, the 99%, have been unwittingly subsidizing the uber-rich.
Mansion owners need to pay their fair share and be given a disincentive to not squander our limited collective energy resource, driving up the price for everyone.
*This article was previously posted on San Juan Islander and The Orcasonian. To view the article with comments, visit: https://theorcasonian.com/guest-opinion-should-we-be-subsidizing-the-profligate-power-consumption-of-mansion-owners/
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1/ https://www.opalco.com/wp-content/uploads/2024/02/Anatomy-of-a-Close-Call-PNGC-R4.pdf
2/ https://www.opalco.com/why-is-my-opalco-bill-so-high-this-month-cold-temps-bpa-demand-charges-and-4-rate-increase/2022/01/
3/ https://www.opalco.com/wp-content/uploads/2024/02/Anatomy-of-a-Close-Call-PNGC-R4.pdf
4/ Based on OPALCO’s 2019 Cost of Service Study (https://www.opalco.com/wp-content/uploads/2018/09/2018-Cost-of-Service-Study-Presentation.pdf) cost-reflective demand charges should be $8.30/kW to cover the costs of “wires” (distribution system). These numbers were based on 2017 data, which means the current figures could be substantially higher due to inflation, more stringent regulations, etc. If we assume a conservative inflation-driven 15% cost escalation, the demand charge would be around $9.55/kW. The other part of the demand charge is related to the penalty BPA charges for peak demand (at $300,000 per 85 MW peak, this amounts to a demand charge of $3.33/kW to cover the demand cost of purchased electricity.
Our customer-owned electric utility, OPALCO, has voiced with increasing alarm: “blackouts are coming.”/1 Why? Coal and natural gas-fired power plants are being retired faster than we can add new wind and solar energy, and electric load is growing with the addition of new electric vehicles and power-hungry data centers. We are entering a new reality where electricity will be in short supply and the consequences for our electric bills may be painful.
For OPALCO, the biggest crunch time is when the mercury dips well below freezing and our heaters work extra hard to keep us warm and pipes from bursting. A cold snap in December 2021 led to a spike in power consumption that resulted in a $300,000 penalty/2 imposed by OPALCO’s wholesale power supplier, the Bonneville Power Administration (BPA), for peak consumption exceeding the normal range. This past January cold weather triggered a similar penalty.
To make matters worse, when demand spikes, BPA has to scramble to find extra supply in the spot market, where prices can be very volatile and can surge to 25 times the normal wholesale price./3
A problem is that there is a gaping mismatch between who causes the demand spikes and how much they pay to cover the system costs associated with peak demand. On 1/12/2024 when OPALCO’s system demand peaked, top 10 residential customers (“mansions”) were consuming as much as the bottom 19% or 2,308 customers! Similarly, the top 100 contributed as much as the bottom 29% or 3,489 homes. (See graph.)
Despite the deeply unequal contribution to the system peaks, OPALCO imposes the same fixed charge of $56/month that every other residential customer pays.
A fairer way to allocate costs associated with the peak consumption would be to use metered demand charge: the more one contributes to the system peak, the more they pay. If allocated based on peak usage, the top 10 customers should have been charged fixed costs of $167,000 per year, instead of the $6,720 OPALCO collected from the flat $56 per month access charge/4 - an underpayment of $160,000. Similarly, the top 100 customers collectively underpaid by $547,000. OPALCO recovers this shortfall by padding everyone’s energy charge. We, the 99%, have been unwittingly subsidizing the uber-rich.
Mansion owners need to pay their fair share and be given a disincentive to not squander our limited collective energy resource, driving up the price for everyone.
*This article was previously posted on San Juan Islander and The Orcasonian. To view the article with comments, visit: https://theorcasonian.com/guest-opinion-should-we-be-subsidizing-the-profligate-power-consumption-of-mansion-owners/
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1/ https://www.opalco.com/wp-content/uploads/2024/02/Anatomy-of-a-Close-Call-PNGC-R4.pdf
2/ https://www.opalco.com/why-is-my-opalco-bill-so-high-this-month-cold-temps-bpa-demand-charges-and-4-rate-increase/2022/01/
3/ https://www.opalco.com/wp-content/uploads/2024/02/Anatomy-of-a-Close-Call-PNGC-R4.pdf
4/ Based on OPALCO’s 2019 Cost of Service Study (https://www.opalco.com/wp-content/uploads/2018/09/2018-Cost-of-Service-Study-Presentation.pdf) cost-reflective demand charges should be $8.30/kW to cover the costs of “wires” (distribution system). These numbers were based on 2017 data, which means the current figures could be substantially higher due to inflation, more stringent regulations, etc. If we assume a conservative inflation-driven 15% cost escalation, the demand charge would be around $9.55/kW. The other part of the demand charge is related to the penalty BPA charges for peak demand (at $300,000 per 85 MW peak, this amounts to a demand charge of $3.33/kW to cover the demand cost of purchased electricity.
Peak usage (in kWh in ONE hour) of all residential customers of OPALCO during the peak consumption day in January this year, sorted from lowest to highest use.
Comment by Eli Derzay
Nov 8, 2024
Nov 8, 2024
1
Thank you Chom and Chris for writing this well supported article on an important subject. Quite a few years ago I wrote a letter to Opalco voicing my concern about the inequity of implementing the flat charge, and their decision to move away from costs being more tied to usage. Same as Julian, I wonder how we customers can best to let Opalco know our conce ... Read All
Comment by Julienne Battalia
Nov 1, 2024
Nov 1, 2024
15
Wow ! I had no idea. Thank you Chom for giving us this information and potential opportunity to correct .
How can we support OPALCO in adopting this strategy?
How can we support OPALCO in adopting this strategy?