Just got word that the Oklahoma Corporation Commission approved PSO's rate case filing. They're implementing a new three-tier residential rate structure effective October 1st. First tier 0-600 kWh at $0.0892, second tier 601-1200 kWh at $0.1047, third tier over 1200 kWh at $0.1234. Also adding a $12.50 monthly customer charge. Anyone else dealing with similar tiered structures? This is going to catch a lot of my commercial clients off guard.
PSO Rate Case Approved - Big Changes Coming
Ohio went through something similar with FirstEnergy back in 2011. The key is getting your clients to understand how their usage patterns will be affected. Ed, are they grandfathering any existing contracts or is everyone moving to the new structure immediately? We found that facilities with consistent baseload got hit hardest by the tiered approach.
Everyone moves to the new structure Frank. No grandfathering unfortunately. I've got a manufacturing client in Broken Arrow that's going to see about a $2800/month increase just from this change. They're on Schedule GP-2 now but might need to look at moving to GP-3 to minimize the impact. The demand charges didn't change much but these energy tiers are brutal for high-usage customers.
Youngstown Municipal went to tiered residential rates last year and it was chaos for the first six months. Customers didn't understand their bills and we were flooded with audit requests. Ed, I'd recommend getting ahead of this and sending explanatory letters to your clients before October. Show them side-by-side comparisons of their historical bills under both rate structures.
Good advice Jim. I'm already working on that analysis for my top 20 accounts. The 600 kWh threshold for the first tier is pretty low - most of my commercial clients will hit the second tier immediately. PSO claims the average residential customer will only see a $8-12 monthly increase but my calculations show it'll be closer to $18-25 for typical usage patterns in this area.
Cincinnati Gas & Electric tried a similar approach in 2010 but backed down after customer complaints. Ed, did PSO provide any justification for the tier breakpoints? Those seem awfully low for Oklahoma summers. We typically see 1200-1500 kWh usage for average residential customers here in Ohio during peak months.
Cecilia, PSO's justification was 'encouraging conservation and cost recovery for infrastructure investments.' Translation: they need more revenue and want to shift costs to higher-usage customers. The 600 kWh first tier supposedly covers about 40% of their residential customer base. I think they're underestimating summer usage patterns too. Going to be an interesting winter when bills start arriving.