Tim Echols of the GPSC: Energy Bills Impacted by Rising Costs
Friday, December 9th, 2022
Americans are bracing for steeper heating bills this winter as the nation faces record inflation on most goods and services. Eggs hit $5 a dozen at my grocery store. Gasoline rose to record highs. Used car prices spiked 51%. Necessities like toilet paper have been in short supply. Even the $1 menu disappeared from fast food restaurants. And now, higher fuel costs for oil and natural gas are colliding with colder-than-normal temperatures, causing economists to predict a 30% increase in bills this winter.
While this perfect storm builds, our utilities continue to be obligated to invest in their facilities and incur costs to comply with ever changing federal safety and environmental mandates. As part of a regulatory compact rooted in law in every state in the nation to prevent monopoly pricing, our utilities are legally entitled to recover their costs plus a reasonable return in exchange for an obligation to serve an entire territory without price gouging and without discrimination. As regulators, we sit in judgement over the reasonableness and prudency of those investments and decide what level of return, or profit, is appropriate. We are charged by Georgia law with striking that difficult balance between the interests of customers and the financial health of the utility. We make the hard decisions.
First, the good news. Georgia as a state continues to prosper. Businesses are moving here, jobs are readily available, and our state economy is robust. We have wonderful opportunities for our children, fantastic sports teams, and in Georgia we enjoy one of the highest qualities of life in the country. Our energy rates, though rising, have been below the national average. The service rates for our investor-owned natural gas utilities are in the middle of the pack when compared to peer groups. What most people do not realize is that only approximately 50% of a typical natural gas bill is charged by the regulated utility to pay for the costs of maintaining the system. The other half of the bill is commodity charges for the gas that is used, and those prices are set by market forces.
In recent years, the PSC has been reviewing electric rates on three-year cycles. The new year will ring in new rates and higher bills. On the natural gas side, the refusal of federal agencies to permit new interstate pipeline construction is causing our utilities to construct costly intrastate pipelines and liquefied natural gas facilities to make sure gas is available on the coldest days. As consumers renew contracts that have been in place for one or two years with gas marketers, they are also finding that higher commodity rates are the only option, courtesy in large part to an energy crisis in Europe that is exacerbated by the war in Ukraine. Almost half of our electric generation in Georgia is fueled by natural gas, so the short-term impact of those fuel prices will be felt for the near future.
We have all heard about supply chain issues, and utilities are seeing increases in copper, wire, transformers, vehicles, and labor costs. It is an ugly situation we face. We have hundreds of transformers in Georgia’s system that are approaching or have exceeded the end of their 50-year expected life and are due for replacement. We have retired some aging coal plants and are reinvesting in cleaner alternatives. The long-awaited nuclear units are finally coming online--providing carbon-free energy but bringing the associated costs into rates. Fuel costs of every type continue to hover at record high levels. And as the cost of steel or natural gas goes up, for instance, the ultimate consumers of that product or service will see cost increases. Sometimes it makes sense to spread costs out over time, but at the end of the day, it is not wise to place heavier burdens on future generations.
So, what can be done? First, monitor that thermostat religiously. Second, consumers can save as much as 10% by moving toward a pre-pay program with their utility. Third, find out what energy assistance programs, tax credits, or energy efficiency measures you qualify for by visiting the U.S. Department of Energy website (www.energy.gov/savings/dsire-