“It’s basically a coin toss. Heads, APS wins. Tails, ratepayers lose.”
That was the sentiment from a recent conversation I had with Abhay Padgaonkar, a local management consultant who served as the expert witness on behalf of ratepayers in the Stacey Champion complaint against APS.
I called Padgaonkar last week in search of answers, specifically, how I could determine which APS rate plan would cost me the least.
Like many Arizonans, my summer electricity bills are sky-high, second only to my mortgage. With triple-degree heat combined with more people working and schooling from home, I’m looking for ways to save money.
APS has a rate comparison tool on its website, but considering the previous tool provided customers with erroneous information, I wanted to double-check the math myself.
I called APS, asking several representatives to help me figure out how the company calculated the 17 different charges on my electricity bill. Service reps struggled to answer basic questions, such as defining the difference between “on-peak delivery service charge” and “generation of electricity on-peak” or where I could locate the formulas for these items on the website.
When I spoke with Padgaonkar, he wasn’t surprised, telling me, “The formula is a purposefully confusing and complex design. I have two master’s degrees, and it still took me a few months to figure it out.” (It should be noted that Padgoankar and Champion were the individuals who blew the whistle on APS’ flawed rate comparison tool.)
Padgaonkar determined that a demand charge plan could save me money on my electricity bills this summer, but if I wanted to maximize my savings, I needed to dramatically alter my energy consumption habits and tactics.
I consider myself an energy conscious consumer. I do exactly what APS recommends on its website. I stagger my appliance usage, doing laundry on the weekends and running the dishwasher at night. During the summer, I keep my A/C set at 78-degrees during off-peak hours, then bump it up to 82-degrees from 3-8pm, during on-peak hours.
But as Padgaonkar informed me, “That’s not gonna cut it.”
To save money on a demand plan, which is a plan that tacks on a fee for the highest hour of electricity consumed each month during on-peak hours, you need to super-cool your home.
Super-cooling is not detailed on APS’ website, but you can find more information on it here. Basically, it means dramatically cooling your home (think winter temperatures) during off-peak hours, so the air conditioning never kicks in during on-peak hours (3-8pm).
Beyond the extra sweaters, super cooling also requires a constant monitoring of expected high and low temperatures and a programmable or smart thermostat. Sure, you could set timers and adjust an old thermostat multiple times per day, but if you mess up just once and forget to increase the temperature at 3pm or run a load of laundry before 8pm, you’ve blown your entire month’s savings.
Remember, a demand charge isn’t an average of energy consumption during on-peak hours but rather the single highest hour in one month’s billing period.
My home is now outfitted with programmable thermostats and a stash of blankets, but what about ratepayers who live in older homes with inefficient windows and doors, a lack of insulation or old appliances? What about those who cannot afford to spend several hundred dollars on the installation and cost of a new thermostat?
According to Padgaonkar, they’re simply out of luck. This is a situation where those who can afford the technology and energy efficiency updates will reap the benefits, while those who cannot are left to suffer with higher costs and a larger electricity bill burden.
Are the commissioners at the Arizona Corporation Commission, the ones we elect to oversee utility rates and safety, satisfied with this outcome?
It seems so. With the exception of Commissioner Sandra Kennedy, every other commissioner voted to maintain APS’s rate hike and redesign, even though Padgoankar and Champion (as well as other energy experts) had warned that residential demand charges are experimental and cannot be successful unless consumers understand how to maximize savings and have the technology to do so.
I’d be willing to wager that the vast majority of ratepayers do not have the information or technology to meet either of those criteria. In fact, APS has admitted as much, informing Commissioner Justin Olson that a majority of its customers are not on their most economical plan.
The good news is, these rates are not set in stone. The commission is scheduled to hear arguments for another APS rate hike later this year. They could force the company to go back to its less confusing time of use (TOU) plans or create better options for those who cannot benefit from demand charge pricing.
The commission could also shrink the company’s return on equity, which has allowed APS to spend heavily on political campaigns and executive salaries at the same time many thousands of customers are struggling to pay their bills.
It’s time for commissioners to do more than issue a few strongly worded rebukes against APS. They need to put the concerns of captive ratepayers above the outsized profit desires of a regulated utility. If not, then it’s up to us to vote in new commissioners who will.