When Georgia Power customers get our June bills, we might wonder why they've increased: Bills are rising because Georgia Power and regulators are passing Plant Vogtle's construction costs on to us, again.
Cary Ritzler | June 6, 2024 | Clean Energy Generation, Energy Justice, Georgia, UtilitiesDo you ever open your power bill and wonder what the heck happened? Did somebody leave the refrigerator open all day? Was there a cold snap or heat wave and you forgot about it? Is there a vampire load somewhere in your house?
Before you go blaming your housemates, googling recent freaky weather in your area, or crawling around your house unplugging appliances with digital clocks on them, you should know that it’s probably not you! Your electric bill is probably going up because someone (namely, your power company and its regulators) decided it should.
Understanding how investor-owned utilities (which serve the majority of customers in the Southeast) operate and how their actions impact customer bills is important to understanding why bills increase AND what ratepayers can do about it. This article will explain why bills keep going up in Georgia Power’s territory, and what we can do about it.
Bills are high, even though rates are low
According to a 2023 report from Southereast Energy Efficiency Alliance (SEEA), residents of Southeastern states have the highest energy bills of any other region in the contiguous United States. Even though utilities in the Southeast tend to have lower rates, or the price per kilowatt-hour, than those in other parts of the country, residents still have some of the highest bills, because we use more electricity, and the burden is higher in Black communities. This disparate impact on Black communities is due to a host of reasons, including Jim Crow era discrimination while the South was being electrified; red-lining; poor housing stock; and disinvestment in Black and low-income communities. Bills can also go up without increased rates, if companies add fees and tariffs that every customer has to pay each month regardless of how much energy they use.
Guaranteed Profits for Investor-Owned Utilities
In most utility markets (including the Southeast region), residents do not get to choose which electric utility they use; instead, residents have to use the utility that serves their area. Investor-owned utilities (IOUs) serve most urban areas and many towns in the Southeast; in rural areas and some small towns, residents may be served by an Electric Membership Cooperative (EMC) or municipal power company managed by the local government. There are some exceptions to the monopoly: sometimes new, large customers such as manufacturing plants can choose to buy electricity from different utilities operating in a state. Local governments enter into multi-decade contracts with utilities, and could theoretically change their energy provider when their municipal contracts end, though this is rare. Most of us, though, have only one option for our electric utility.
IOUs are in a unique position compared to other for-profit companies: In the 1920s, when electricity was beginning to be considered for the public, IOUs agreed to raise private funds to pay for power plants, transmission lines, and associated costs of electrifying portions of the U.S. In exchange for shouldering such a massive investment into a public good, companies would be guaranteed a customer base within a territory, and would be guaranteed the opportunity to make a profit. The guaranteed profit helped them to attract shareholders to pay for the initial infrastructure, and the guaranteed customer base created monopoly territories within which IOUs still operate today.
Unfortunately, the unique business model for IOUs does not incentivize renewable energy construction in the same way that it does for fossil fuel and nuclear plant construction, even though renewable energy often costs customers less to use and certainly helps avoid the devastating environmental consequences of burning fossil fuels. Renewable energy fuel costs are nonexistent once the equipment has been installed (wind, sun, and geothermal heat are free once turbines, panels, and systems are built) so customers could benefit from such investments (particularly in distributed renewables like rooftop solar, which can directly lower customer bills at the site). Also, distributed renewable energy and energy efficiency measures can be installed by building owners at low- or zero-cost for the utilities. These characteristics are advantages, but since IOU profits are driven by shareholder investments, it is unfavorable for utilities to invest or even allow individuals to invest in distributed renewables, because it undercuts their need to build big new centralized power plants (thereby dampening their future shareholder profit projections) and decreases the need for people to purchase power from big plants that are already built. This doesn’t mean that on-site solar can’t be a profitable business enterprise–it definitely can, and is currently driving job growth in Georgia–but the current model for IOUs is throttling that opportunity.
Utility Regulators Often Don’t Serve their Intended Purpose
When IOUs were being established in the early 20th century, lawmakers wanted to provide oversight in exchange for granting utilities their monopoly status. As monopolies, IOUs would not be subject to normal market competition, and decision-makers recognized that this could be a problem. Since customers could not choose to buy electricity from anyone else within the monopoly territory, public utility commissions (PUCs, or in Georgia, the Public Service Commission or PSC), were created to balance the utilities’ need for profit (without which they would have no motive to pay upfront to build the electric grid) with customers’ interests. In theory, this system would ensure that utility companies didn’t exploit this monopoly status and pass exorbitant costs on to customers. Unfortunately, over the years, many PUCs have tended to side with utility companies over the interests of customers. Instead of protecting customers from unnecessarily high bills, many PUCs allow utilities to invest with abandon, driving up share prices and guaranteed profits, while customers shoulder the increased costs resulting from those investments.
This dynamic is on display in Georgia right now.
- Georgia Power, like other IOUs, heavily lobbies policy makers, and often opposes state and federal policy that would promote renewables or hold the company to a higher account than the PSC has been willing to do.
- Georgia Power’s profits are already rising in 2024, as Plant Vogtle comes online and customers begin to pay for the additional cost. After charging customers, on average, $926 over 14 years to build Plant Vogtle, Georgia Power is now raising rates again starting in May, to cover the costs, and cost-overruns, of the new nuclear units.
- In April, the PSC approved Georgia Power’s plan to build three new gas and oil combustion units, which will be recovered in rates for decades to come. In addition to increasing customer rates, this will also lead to an increased reliance on fossil gas, leaving customers exposed to fuel cost volatility. Fossil gas prices increase and decrease due to a host of factors. If (and when) the price of fossil gas rises, as it has in the past, the utility will be allowed to seek more fuel cost recovery in the form of increased customer bills.
- Georgia Power often eschews investments in lower-cost energy efficiency and opposes policies that would promote on-site and distributed generation solar (such as net metering and community solar), which could save ratepayers money and limit the need for additional new fossil power plants.
Tariffs and Cost Recovery
IOUs are not allowed to earn a profit on the cost of fuel, meaning that they can’t charge customers above what they pay for coal, nuclear fuel, or natural gas (sunshine, the other popular “fuel” in Georgia, is free once solar panels have been installed). There is also a mechanism to stop them from having to lose profits if fuel costs rise. That means that when making decisions about which type of fuel to rely on, electric utilities don’t have to worry much about whether they are seeking to use an expensive or volatile fuel. If the cost of fuel (such as natural gas) rises, utilities can ask their PUCs to raise customer rates to pay for it.
Recovering costs sounds fine and reasonable, until you remember that the costs they are recovering are derived from utilities’ own decisions and planning, and that the method of recovery almost always involves raising customer bills. At times, Georgia Power does recover costs from its shareholders, but by and large, the Company shifts costs onto customers, and minimizes its own risks. Currently, Georgia Power is amidst six bill increases approved for the three year period 2023-2025.
Utilities can also use legislative action to make sure customers are on the hook for costly decisions. For instance, ever since a 2010 state legislature decision, Georgia Power customers have been paying a Nuclear Construction Cost Recovery tariff to build Plant Vogtle, a nuclear facility often described as a “boondoggle.” As construction for the Vogtle project dragged on for 14 years and costs ballooned, Southern Company has settled lawsuits with construction partners for being above cost and behind schedule, while forcing its customers to continue financing the project. With the completion of the Plant Vogtle expansion, the NCCR tariff will go away, but it will be replaced with a rate increase. The utility also charges customers to clean up its own coal ash, under an Environmental Compliance Cost Recovery.
What can we, the ratepayers, do about this?
Understand Your Utility Bill
Utility companies benefit when people think that high bills are inevitable or the result of their own behavior, because the utility company doesn’t have to be accountable to the public if the public doesn’t know who is responsible. If you are in Georgia Power’s service territory, compare your annual bills over time, and see whether increases are showing up on your bills. If your friends, family, neighbors, and coworkers mention their bills going up, let them know that it’s likely because the utility chose to raise rates, fees, and riders, and that the PSC allowed it to happen.
Get to Know Your Elected Utility Commissioners
Public Service Commissions are the primary regulators of investor-owned electric utility companies, and hold regulatory power over important decisions such as rate increases and utilities’ plans for how they will meet power demand in future years, known as integrated resource plans (IRPs). In Georgia, PSC members are elected by the public on a statewide ballot. Most current commissioners in Georgia have voted favorably for every rate increase Georgia Power has requested in recent years without pushing back.
Show Up at Public Service Commission Hearings
The Georgia PSC allows public comment at each biweekly Committee meeting and also at the beginning of rate cases and IRP hearings. Georgians often show up to speak out against new rate increases. This is a chance to make your voice heard and hold the PSC members and the utility accountable to the people they serve.
Reach Out to Your State Legislators
Georgia Public Service Commissioners have shown little appetite to oppose Georgia Power’s proposals to expand fossil fuels, efforts to dampen residential solar growth, and requests to raise customer bills repeatedly. But, state legislators have begun to question the utility’s power and propose new laws that could add transparency and promote solar expansion in the state. Legislators across party lines introduced bills in 2024 that could have enabled community solar, established a new counsel to attend more closely to consumers’ needs, and provided more transparency on the fuel mix that is producing electricity each month. None of these bills advanced this year, but they can be re-introduced in future sessions. Georgia Power customers who are facing bill increases can let their legislators know that they support clean energy, consumer protection, and transparency from their utility.
Take Advantage of Clean Energy Incentives
Transitioning our homes, buildings, and vehicles from burning gas and oil to running purely on electricity is one of the most impactful ways to combat climate change, and often brings lower costs when compared to gas appliances and internal combustion engines (ICE), even when utilities are raising electricity rates and adding fees. Charging electric vehicles (EVs) at night can actually increase utility efficiency and put downward pressure on rates for all customers on the grid, because this allows utilities to even out consumption over a 24 hour period–a welcome incentive for electric utilities to meet their revenue needs without further burdening their customers with higher bills.
And, whereas gas appliances and ICE vehicles will always run on fossil fuels, there is the chance for electric cars and appliances to run on completely clean energy as we increasingly source our electrical power from renewables. Residents can combat rising electricity rates by investing in low-cost energy efficiency measures and receive tax credits for doing so. Tax credits are also available for electric vehicles and solar power.
Soon, many states in the Southeast will be developing rebate programs for household electrification and energy efficiency upgrades, some of which will be exclusively for low-income households. As the grid gets cleaner–even if it is in fits and starts as clean energy advocates battle fossil fuel interests in utility and state legislative proceedings–efficiency and electrification will make it easier to meet needs with clean energy.
Get Involved in the Clean Energy Generation
As members of the Clean Energy Generation, we all have the power to take action and make a difference where we can in reducing our energy usage. We can explore energy upgrades to make our homes more energy efficient and comfortable, as well as the methods to help make these changes more affordable – and then we can share what we learn with our communities. However, the burden isn’t solely on us. Understanding how our utility providers produce energy and how utility regulators charge us for that energy is important.
To learn more from one Georgia resident who made home energy improvements more affordable with the help of incentives and funding, watch our Clean Energy Generation webinar with Larry Heiman.