Dive Brief:

• The Northern Indiana Public Service Company (NIPSCO) asked the Indiana Utility Regulatory Commission (IURC) to increase its monthly fixed fee for residential customers nearly 100% — from $11 to $20 — and its per kWh rate by 11%. The changes would likely increase the average residential customer’s bill by $17 per month.
• Indianapolis Power and Light (IPL) wants the commission to allow a more than 50% increase of its fixed monthly charge to residential customers from $11 to $17. The utilities argue the increased monthly fees are necessary to cover infrastructure costs because revenues from electricity sales are increasingly being lost as consumers use electricity more efficiently and their own distributed generation.
• Consumer groups argue large fixed monthly fees like NIPSCO’s shift the burden of paying for system infrastructure to smaller and less affluent customers who use less electricity but pay the same fixed charge as larger users. 

Dive Insight:

While some utility industry leaders may be beginning to move beyond high fixed charges, a number of power companies are still following the trend started around 2013 to shift more utility revenue away from volumetric charges. 

The idea, according to utility backers, is to cover infrastructure costs with the higher fixed charges, preventing the cost for grid upkeep from being shifted to customers who do not have their own distributed generation. 

Critics, however, say the focus on high fixed charges is misguided, and hurts both efficiency efforts and the growth of distributed generation. 

"No matter how little you use or how small your house or apartment, you end up paying a similar amount as those living in a mansion,” according to National Consumer Law Center senior energy analyst John Howat. “There's a real fairness issue here."

Howat said higher fixed charges unfairly impose burdens on low income groups and also encourage customers to use electricity less efficiently because reduced consumption has proportionately less impact on their monthly bills.

Utilities seeking sharply increased monthly fixed charges are deviating from long-established rate design principles holding that only costs that change with the number of customers served belong in fixed monthly fees, according to according to "Smart Rate Design for a Smart Future," a report from the Regulatory Assistance Project. Because fixed charges unfairly shift system costs, they risk “putting the very viability of the industry in question.”