As a consumer-owned not-for-profit utility, Benton PUD exists solely to operate in the best interest of our customers. And we know affordable, reliable, and environmentally responsible electricity is critical to your health, safety, and well-being.
In addition to ‘keeping the lights on’, it is our job to be forward thinking and to anticipate and plan for increases to our costs, which are your costs. With some of the most aggressive clean energy laws in the nation, Washington state’s unprecedented regulation of all electric utilities is beginning to put a premium on the cost of supplying electricity when customer demand is the highest.
We know energy policies can be confusing and politically polarizing, but the simple fact is that electricity is a just-in-time service where the unforgiving laws of power grid physics requires the supply of electricity to precisely match demand on a minute-by-minute basis. While we are just beginning to experience increasing cost pressure during high customer demand periods, we anticipate this pressure will grow over time as utilities are forced to rapidly replace controllable, dependable, and affordable technologies with intermittent and variable wind and solar to satisfy Washington state’s 100% non-greenhouse-gas emitting electricity requirements.
While it is true, with the help of generous tax subsidies, the costs for individual wind and solar farms have gone down in recent years, their inability to produce electricity in a controllable pattern matching customer demand comes at a high net cost due to the need to overbuild these technologies. Overbuilding means you must pay for multiple wind and solar farms to increase the probability the total actual generated electricity derived from the sun and wind will add up to enough to meet customer demand across a wide range of weather and temperature conditions. But wind and solar are far from a perfect replacement of dependable technologies which means backup technologies must be in place and paid for, even if they only run part of the time. While energy storage technologies like batteries are beginning to be installed, they have serious operational limits. And no matter what form it comes in, energy storage will add significant costs to electricity due to the very large scale and redundancy needed to make a difference in power grid reliability.
While Washington state’s 100% non-emitting electricity generation requirement by 2045 may seem like a far-off date, the effects of the requirement’s post 2025 prohibition on coal-fired baseload generation and punitive financial penalties for using natural gas generation beginning in 2030 are impacting electric utilities like Benton PUD today. Additionally, these laws have already added significant costs to the wholesale electricity market during high demand periods by adding a carbon tax to the cost of controllable natural-gas-fired generation needed currently for balancing electricity supply and demand on the hottest and coldest days of the year.
The bottom line is the costs of backup technologies, plus the costs of wind and solar overbuilds and the batteries they need to overcome their inherent operational deficiencies will increase the cost for utilities to maintain power grid reliability. And these increased utility costs are well established, particularly in states like California where some residential retail electricity prices are more than four times higher than what Benton PUD’s customers currently pay.
Fortunately, Benton PUD’s over 90% non-emitting, affordable and reliable hydro and nuclear wholesale power supply portfolio is helping keep our prices in check for now. But hydroelectric dams can only do so much. And while they too are a controllable source of electricity, they also represent variable generating technology with electricity output dependent on available water in the rivers which can vary significantly from year-to-year and month-to-month. Additionally, in attempts to improve salmon runs, the generating capability of hydroelectric dams has been reduced significantly over the years by routing unprecedented amounts of water through spillways rather than through turbine-generators. And calls for even more spill continue to be a part of ongoing litigation related to dam operations which could further diminish the amount and flexibility of hydropower in the future.
So how is Benton PUD responding to the increasing cost of grid reliability? First, we started by requesting a change to our wholesale electricity supply contract which was approved and implemented by the Bonneville Power Administration (BPA) October 1, 2023. This contract change gets Benton PUD out of the business of transacting directly in wholesale electricity markets which are becoming more volatile and uncertain in terms of price and availability of dependable generating supplies. Second, we are implementing changes to our rate design to begin to align rates with how our costs are incurred. Last year, a demand charge was implemented for Residential customers that set the framework for a more fair and appropriate collection of revenues that better aligns with Benton PUD’s costs. Later this year, we are implementing a demand charge for Small General Service customers and making some small changes to how demand is billed for Medium and Large General Service customers. Demand charges have been in place with Benton PUD’s larger commercial, industrial, and irrigation customers for most of our 77-year history so it is not a new concept. And while some costs of regional power grid generation and transmission has been included in longstanding demand charges, historically the biggest cost drivers were utility investments in equipment and wires required to avoid overloading local community electric delivery systems during high customer usage periods.
Our goal is to keep rates as low as possible and we want to work with our customers to achieve that. In the past, due mostly to metering equipment limitations, rate making contained inherent inequities among customers by including the majority of utility fixed costs and grid reliability costs in the volumetric energy charge, especially for residential and smaller commercial customers. Through investments we have made in Advanced Metering Infrastructure, we are now in a position to improve our General Service retail rate design to better align with how our costs are incurred while also providing a small price signal that rewards customers who are able to reduce the maximum rate at which they are using electricity throughout each month. Starting in November, Small General Service customer bills (that will include usage from October) will incorporate a demand charge of $1/kilowatt. Like long established demand charges for larger commercial, industrial, and irrigation customers, the new demand charge will be calculated one time each monthly billing cycle and will be based on a customer’s highest average usage during all thirty-minute periods of the cycle. To make this change in a manner that does not result in overall increased revenues for Benton PUD, our Small General Service energy rate which represents the majority of a customer’s bill will be decreased from 6.30¢/kWh to 5.92¢/kWh. The change will charge customers that place a higher demand on Benton PUD’s electricity delivery systems a premium and provide an opportunity for customers to lower their bill by decreasing their maximum demand.
Medium and Large General Service customer rates currently have demand charges, however there is no charge for the first 50 kilowatts of demand. Starting with bills issued in November (that will include usage from October), these customer bills will include a demand charge of $1/kilowatt for the first 50 kilowatts of demand. Demand in excess of the first 50 kilowatts will be billed using the existing demand rates. These changes are also being implemented in a revenue neutral manner by decreasing the energy charge from 5.48¢/kWh to 5.33¢/kWh for Medium General Service, and from 4.71¢/kWh to 4.69¢/kWh for Large General Service.
While this may sound complicated, it really is as simple as managing how much electrical equipment is being used at the same time. Every customer is different and has a pattern of usage which may or may not result in significant changes to their monthly bill with the updated rates. For customers with flexibility in how they use electrically powered equipment, it may be worth it for them to consider shifting the time of day during which they are using equipment with the highest rates of electricity consumption. Benton PUD provides an online portal, SmartHub, where you can view and monitor your usage; identify trends of when your maximum demand is occurring; and determine how you may modify future electricity usage patterns if desired.
For the majority of General-Service customers, the new rate structure will result in a change to their monthly bill of 2.5% or less on average, either as a reduction or an increase. And it establishes the framework for a more fair and appropriate collection of revenues that better aligns with Benton PUD’s costs. The bill Benton PUD receives each month from BPA includes a demand charge which means that if customers reduce their demand, our wholesale costs will go down, which takes pressure off increasing retail rates. Benton PUD has a longstanding tradition of forward thinking. Looking ahead, the implementation of these demand charges is an incremental and small impact change to put in place, so our customers have as much control over their power bill as possible on our way to meeting the State’s requirement to be 100% carbon free by 2045.