Substantial Minimum Charge in Electric Bills

Deck: 

Fixed minimum charge was a much higher percent of electric bills in 1940 Wisconsin.

Today in Fortnightly

The fixed minimum charge was a much higher percent of electric bills in 1940 in Wisconsin. This was common throughout the country, from Maine to Mississippi, Massachusetts to Montana.

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Over the years, the fixed charge remained, well, mostly fixed with little adjustment for inflation. But the variable charges in electric bills continually rose with inflation and with growing kilowatt-hour consumption. 

In Wisconsin, 76 years ago, the 24 investor-owned utilities had a fixed charge within the range of a dollar to five dollars per month. Most had a fixed charge in the narrower range of three to four dollars. 

And there the fixed charge stayed, pretty much, through the decades since. Until recent regulatory proceedings on rate design. 

Most customers in those days, in rural Wisconsin, paid an electric bill that was nearly all or all fixed charge. The weighted average bill totaled $3.84 for forty kilowatt-hours of usage, $4.00 for fifty, $5.55 for a hundred, $6.81 for a hundred and fifty, and $9.32 for two hundred and fifty. 

For the very heaviest users of electricity, the fixed charge was still forty percent or so of the total bill. For medium users, the fixed charge was fifty, sixty or seventy percent of the total bill. For light users, the fixed charge was the total bill.

These rate design debates we're having in 2016 seem new. But we're really revisiting rate design traditions. When it was recognized that much of what it takes to provide electric service has a fixed-cost nature.

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Wandering through the Library of Congress again, your Public Utilities Fortnightly Editor-in-Chief came across "A Comparison of Rural Electric Rates in Wisconsin and Statistical Summary for 1940," published by the Wisconsin Department of Agriculture. The above numbers courtesy of this worn document and number-crunching courtesy of yours truly.

Steve Mitnick, Editor-in-Chief, Public Utilities Fortnightly

E-mail me: mitnick@fortnightly.com