Commentary: Santee Cooper wants to raise your rates; these 4 changes will make them fairer

At a recent public hearing on Santee Cooper's proposed rate increase, both experts and individual residents agreed on several key points, to which Santee Cooper CEO Jimmy Staton said the company will respond in November. Without the four fixes described below, customers will be shocked next year when this rate increase kicks in on top of two other planned rate increases.

First, Santee Cooper newly proposes that residential customer bills will be based largely on the customer's single highest hour of electricity usage during the month. Hardly any other large utility in the country requires residential customers to pay such "demand" charges.

Numerous commenters flagged the potential for this one-hour charge to blindside residential and small business customers with increases unrelated to overall energy usage and only loosely based on utility system costs. For instance, a customer who saves energy during peak times every day of the month except one would receive the same high peak charge as a customer who made no effort to reduce peak energy use, and peak charges would apply even during times that usually are not peaks — such as mild spring days and weekends.

The state Office of Regulatory Staff found that the residential demand charge would cause 1 in 10 residential customers to see their bills go up by more than 30%. The effects on small business would be even more dramatic.

This issue was also flagged by the state's Office of Consumer Affairs, the American Association for Retired People, the South Carolina Small Business Chamber of Commerce, the Southern Alliance for Clean Energy and the Regulatory Assistance Project.

Second, business and environmental groups pointed out in written comments that the demand charge rate would be the only option for customers with their own solar and/or battery systems, giving them little incentive to provide energy to the grid when it matters most. This doesn't merely affect solar customers: All customers would benefit if customers with solar and battery backup help meet expensive peak energy needs.

Third, Consumer Affairs and other commenters noted that Santee Cooper has the highest monthly service charge (almost $20) of any major S.C. utility. Other utilities charge $10-$15. Combine this with the peak demand charge, and the result would be that many customers would be able to control less than half the bill by using less energy. Furthermore, large homes with above-average usage would actually see bill decreases while small homes would pay more.

Fourth, Consumer Affairs noted that Santee Cooper determines the share of power plant cost that is paid by residential customers using a method that tends to put more of the cost on the residential class, even though the output of the most expensive power plants more closely matches the steady power demand of large industrial plants. This is a key reason Santee Cooper's proposal would increase residential rates more than three times as much (+8.7%) as industrial rates (+2.8%).

Sen. Chip Campsen recently grilled utility executives in a Senate hearing on whether residential customers will end up paying more than their fair share for future power plants needed to serve major industrial growth. But this problem exists today under Santee Cooper rates. Now is the time — before the addition of billions of dollars of power plants needed to serve industrial load growth — to institute fair sharing of costs between residential and business customers.

These four fairness issues can be addressed while still allowing Santee Cooper to collect its rate increase.

First, Santee Cooper's basic residential rate should be based on the total amount of energy used during the month — even if energy costs during peak hours are higher. A single hour should not drive the bill of a small customer, and the rate should not be high during non-peak hours.

Second, solar and battery customers should be given full credit for peak energy supplied to the grid throughout the month — just as they do in other parts of South Carolina, under Dominion Energy South Carolina and Duke Energy.

Third, Santee Cooper should reduce its high fixed monthly charge and collect the same revenue on the basis of total energy used.

Fourth, Santee Cooper should allocate power plant costs on a basis that more closely matches the load of the customers being served. Large power plants don't just serve the peak electric loads driven by residential and small business air conditioning and heating. They also serve round-the-clock industrial needs. Fair cost-sharing will be much easier to implement now, before the next massive round of power plant investments causes further rate increases.

Eddy Moore is decarbonization director with the Southern Alliance for Clean Energy.