Rates vs. Bills: An open letter from GLM leader Nancy Deren to our City Commission

Part I. Rates vs. Bills

GRU’s rates have become a hot button issue in the past couple of years. Much confusion seems to exist in understanding the difference between GRU rates and bills. We hear those terms used interchangeably, but they are two very different measurements.

Increasing rates and bills have had an impact on many GRU customers, and have created hardships for some, especially those in inefficient housing or commercial buildings. We can agree that some of the factors in these increases, such as the feed-in-tariff and biomass contract, although important to diversifying our energy supply and reducing our exposure to volatile fossil fuel prices, could have been better negotiated and implemented for the benefit of our community.

Our City Commission has listened to the criticisms and suggestions of the Gainesville Area Chamber of Commerce and others, given serious attention to addressing current GRU policies and procedures that need improvement or revision, and taken numerous steps to implement changes to mitigate the impacts of those higher rates and to ensure we have clear policies, transparency, and well-defined direct lines of communication going forward.

Our concern is that the fixation on rates is distracting us from dealing with very large challenges looming ahead for utilities, transportation, water, and other core city functions. If we move on and restore a focus on implementing well-researched, innovative, and diversified programs, our entire community will be better served now and in the future.

Rising rates are a national issue, not unique to GRU. The Bureau of Labor Statistics recently released the annual electricity price index showing that 2014 was the most expensive year ever for electricity in the U.S., with the average price of 14.3 cents/kWh last summer, surpassing 2013 which previously had the highest ever average prices at 13.1 cents/kWh. High rates are relative—and are related to electricity sales, fuel mix and where you live: Customers in Hawaii pay 36.98 cents/kWh; Vermont’s average rate is 17.4 cents/kWh.

Rates are going up across the country due to a combination of factors that include flattening demand and sales, increased cost of extraction and delivery of fossil fuels, aging infrastructure, and a 100-year old outdated utility model.

The on-going criticism about GRU rates refer to comparisons with other utility’s rates based on 1000-1200 kWh/month usage. Criticisms are also in regard to commercial rates, even though they are worded to imply residential rates. However, most (88.9%) GRU customers are residential users, and most (74%) of those residential customers use less than 750kWh/month, 84% use under 1000kWh/month, so most of us are in the two conservation rate tiers, where those electric bills are some of the lowest in the state.

Rates do not equal bills! You can have low rates and high bills or have high rates and low bills.

Rates are a red herring for two major reasons:

  • Rates distract us from addressing major root causes of high bills: inefficient housing and commercial buildings, our habits, and lack of awareness about our energy and water use.
  • Rates distract us from addressing the elephant in the room: that the current centralized, antiquated utility model and rate structure, based on “burn to earn,” is in direct opposition with the need to drastically cut our fossil fuel use and conserve and protect our water.

Developing new utility models that generate revenues in completely different ways is a global imperative. The entire way rates are determined must change. Energy costs are going up across the world, and are becoming more difficult to afford, and we have less control over these costs than we do over our consumption and policies.

Part II. Efficiency is the Key

Most existing housing, and buildings in general, are inefficient energy sinks. Buildings consume more energy in the U.S. than transportation or industry. Almost half of Florida’s energy use goes into buildings. Gainesville residents are especially affected since more than 88% of GRU’s customers are residential, and renters make up 51% of those customers. Renters have limited control over their housing energy efficiency, and this affects their bills. This applies to renters of commercial space as well.

In addition to energy inefficient housing, lack of knowledge and awareness about how to reduce electric and water use affects the bills of customers at all income levels.

How do we mitigate the very real and hard impact of higher costs on our most vulnerable citizens? Again, this is a national issue that we are all facing and will be facing in a much bigger way over the rest of this decade and beyond. We need to be vigorous and creative in developing ways to buffer those who are already heavily impacted.

GRU and the city have already been proactive in implementing an array of programs including LEEP, Project Share, and partnering with the Community Weatherization Coalition in an effort to assist those most affected.

The fastest, most effective way to reduce utility bills for everyone, residential or commercial, regardless of income level, is energy conservation and efficiency. The cheapest kW is the one you don’t use.

The September 2014 International Energy Agency Report calls energy efficiency the “first fuel,” with potential to boost cumulative economic output by $18 trillion by 2035.  We have many examples of this potential here in Alachua County:

  • The School Board achieved savings of $1.6 million in the 2012-2013 school year due to aggressive investments in energy efficiency.
  • The county commission has used recommendations from the Energy Conservation and Strategies Committee to reduce use and bills across county departments and facilities. Alachua County has saved hundreds of thousands of dollars over the past five years despite rising rates.
  • The county jail is the latest example: Bills were reduced from $74,385 in January 2013, to $43,097 in January 2015 despite higher rates, directly because of energy efficiency upgrades and reduced waste of water and electricity.

Individuals can achieve dramatic reductions as well. Simple energy efficiency upgrades, such as providing low flow shower heads, faucet aerators, fixing leaky toilets, and providing consumer education by the Community Weatherization Coalition has reduced the GRU bills of nearly 600 low-income residents by up to 24%.

Individuals can reduce their electric and water bills by 15% to 70% by changing habits and making energy efficient, durable upgrades to housing and appliances. They also gain a healthier, more comfortable living environment.

Gainesville and Alachua County have a long-standing commitment to environmentally aware policies and practices. We have been at least ten years ahead of most of Florida and the Southeast in adopting energy and water conservation and efficiency measures and increasing our use of renewable energy.

Part III. A New Model for Utilities

Nationwide, the utility industry is in the process of wrestling with what some are calling the “utility death spiral,” of how to make the transition away from the current antiquated utility model that includes centralized fossil fuel-based generation, one-way power distribution, and constantly growing consumption. Our goal must be to move to a multi-faceted, distributed model based on efficiency and renewables, that is more reliable, resilient, less polluting and which can accommodate a range of new technologies.

Making the transition to a publicly owned smart grid, broadband, renewables and conservation is essential for our economic prosperity, health and safety, and national security. While we initially will face challenges as well as upfront investments, the decision to engage in diverse and renewable sources of energy will ultimately be less expensive.

It is exciting that GRU is already exploring possible measures such as community-owned solar, fiber optics, smart grids, and time-of-use and other rate structures. This is where we need to focus, rather than stay stuck on on arguing about the past.

Look at Texas. It is the largest fossil fuel producing state and now one of the largest alternative energy producers in the country. Texas has invested almost $8 billion in publicly funded wind upgrades since 2009. Citizens voted for higher rates to invest in those changes, and now in Texas, wind costs $0.025/kWh, while natural gas costs $0.125/kWh.

Gainesville and Alachua County have made investments in energy conservation and renewable energy that have gained us national recognition, have reduced our carbon footprint, have provided us with a more diverse fuel mix, and have given us more energy security and stability than any other county in Florida.

GRU is the most diversified, comprehensive utility in Florida. GRU is not solely dependent on electricity production for revenues, having already diversified into water/waste water, fiber optics, and renewables, providing us a huge competitive advantage going forward.

Our city’s public utility can offer more long-term energy security, price stability, and reliability than utilities that purchase all their power and are completely dependent on natural gas and coal. GRU customers already have a diversified mix of local, renewable, stable electricity thanks to biomass and solar investments, landfill methane purchases, and conservation measures.

GRU is well on the way to meeting the new EPA Clean Power rules, which puts us far ahead of the rest of Florida.

Now is the time to focus on how to accelerate GRU’s shift to fully becoming a utility of the future with an innovative 21st century business model. In the short term, all GRU customers must be encouraged and assisted to find ways to reduce and manage their bills while we research and develop what new models and rate structures will best fit our community’s needs and will serve our city well in the long term. The Innovation Economy will not exist without it.