EPB ends fixed-bill payment plan option

Five years after EPB introduced a pioneering bill payment option that sets a customer's bill at the same amount every month, the city-owned utility is scrapping the plan.

The fixed-bill option is being phased out by April, EPB officials said, due to the volatility of fuel-adjusted rates from TVA combined with efforts to encourage more awareness about energy use.

"We're winding that program down," EPB President Harold DePriest said. "TVA scared the heck out of us two years ago with their rate increases and then last fall they went to monthly fuel-cost adjustments. I can't predict where rates are going."

He said the fixed-rate program also is contrary to the effort by EPB and other power utilities to make consumers more conscious about when and how they use power.

"We're heading towards time-of-day rates with the idea of encouraging energy efficiency," Mr. DePriest said. "Fixed bills are exactly the opposite. I don't want to give up totally on the idea in the long run, but we're going to have to tie it to some kind of energy conservation and perhaps helping let us manage consumer usage in the home."

EPB heralded the fixed-bill plan when it began in 2005 as a way for consumers who wanted stable prices to be shielded from any volatility in their electric bills, regardless of weather or rate changes. More than 14,000 of EPB's 170,000 customers signed up for the option before EPB began cutting it off for new customers last April.

EPB was the only one of TVA's 156 distributors to offer the fixed-bill option. But around the South, Georgia Power Co., Duke Energy and Progress Energy in North Carolina offer plans guaranteeing fixed monthly bills. In such plans, including EPB's fixed-rate plan, monthly electric bills are the same every month and are altered only on an annual basis.

"Our flat rate program has been very successful for Georgia Power and for our customers," said Bob Hughes, manager of product marketing who helped develop the nation's first fixed-rate plan in 2000.

"When we were preparing for deregulation in the late 1990s and talking with our customers about what they wanted, many said they want electricity bills every month to be the same, just like they are for cable television or phone service," he said.

Deregulation of the electric industry didn't come as expected, but the flat-rate plan did and has attracted more than 150,000 users among the 2.3 million customers of Georgia Power.

Under the fixed-rate plans, consumers generally benefit -- and utilities lose out -- when bad weather or fuel prices boost the amount of electricity used or its price.

In 2008, TVA boosted its rates by more than 30 percent through a series of basic rate and fuel-cost adjustments. But in the past year, as rates have dropped by more than 20 percent, some of those on fixed bills have ended up paying more than they otherwise would.

Josephine Covington, who lives in St. Elmo Courts apartments, is among those who thinks she paid too much for power under the fixed-rate bill.

"I live in a small apartment and used to pay less than $40 a month," she said last week after paying her monthly bill at the EPB downtown office. "With the fixed-bill plan, I had to pay $80 a month."

She switched this year to the budget plan, which seeks to level rates throughout the year but still requires consumers to make up for any shortfall at the end of the year. Ms. Covington said she now pays about $77 a month.

The budget plan takes the average power bill for the past 12 months and tries to equalize that for the next year. But at the end of the 12 months, electricity users must pay for any shortfall to EPB. If they use less than budgeted, they get a refund.

Under the fixed-rate plan, EPB guaranteed the same bill for the 12 months regardless of weather or rate changes. EPB added a 2 percent premium to the fixed-bill rates to compensate for its increased risk.

Mr. Hughes said Georgia Power also prices a risk premium in its flat rate plan and has not had a loss in any year since the program began in 2000.

The city-owned utility has realized a $1.7 million gain during the five-year history of the program. But by the time the program is ended in April, most of that surplus could be gone, EPB officials said.

"During the colder winter months this year, that will eat into some of that (extra funds derived from the program)," EPB Chief Financial Officer Greg Eaves said.