Utilities and some others are trying to change the way that they get paid for the electricity they sell to the customer, and not in a way that works to the customer’s benefit.
Electric utilities have asked the Legislature for “expedited cost recovery,” which is a fancy way of saying they want guaranteed cost recovery for investments they make before consumers get the benefit.
The utility in effect gets paid up front, instead of waiting until after the investment is actually impacting the electricity that they sell you. Those advance payments from consumers are billed as “surcharges.”
Paying for them up front deprives ratepayers of the chance to argue later (such as during a pandemic) why the investment recovered through the surcharge may not be appropriate or in the public interest.
It’s like paying for a car before it is built and having to take it even if it isn’t what you wanted or needed.
By mandating that utilities receive expedited cost recovery, ratepayers lose the protections of a traditional base rate case before the Public Service Commission (PSC). There the PSC can consider whether investment costs by the utility may be offset by other expenses that have decreased or revenues that have increased. When surcharges are approved in advance, the interested parties that represent consumer interests are often deprived of the ability to evaluate potential cost offsets and address other important issues, like the rate of return and the proper tax rate to include in our electric rates.
Another effect of expedited cost recovery is to shift the risk of investment from the utility to all ratepayers.
Traditional regulation requires a utility to demonstrate that its investment is “used and useful” before the cost can be recovered from its customers. That protects us as ratepayers and keeps the risk of investment on the utility and its shareholders until the time the investment is actually providing a service or benefit.
Expedited rate recovery will often eliminate that vital regulatory concept.
All energy users should be mindful of legislative attempts to remove consumer protections and shift investment risks to consumers through expedited cost recovery that would increased electric bills. Such legislation was introduced to provide cost recovery “certainty” to the state’s utilities, but what that legislation really does is benefit the monopoly utilities on the tab of West Virginia manufacturers and industries, small businesses, senior citizens and all electricity ratepayers.
House Bill 2959, which is thankfully now dead, sought to accelerate rate recovery for utility costs incurred for environmental compliance. These costs can still be recovered under the traditional regulatory process, if the utility can demonstrate the costs are necessary, reasonable, used,and useful.
The bottom line is that expedited cost recovery will accelerate rate increases for electric ratepayers at a time West Virginia’s electric rates are no longer low. Average electric rates for industrials in West Virginia are higher than industrial rates in Kentucky, Ohio and even New York, and they are about the same as Pennsylvania and Virginia.
Any expedited rate increase resulting from legislative mandates will harm the competitiveness of West Virginia businesses, both regionally and nationally.
Legislative ratemaking bills usually benefit the electric and natural gas utilities and do nothing other than harm their captive ratepayers. Legislatively mandated, accelerated rate increases are simply not necessary for the utilities to comply with their environmental obligations or to receive cost recovery. The West Virginia Legislature should recognize that and reject any expedited cost recovery amendments to pending bills like SB 542.