What To Know About Increasing Utility Rates

There is a lot more to your utility company than you know…

As a homeowner, you are already used to paying your continuously increased utility bills. You have probably figured out better ways to save money and cut costs on your bills during the hot summer months. This might include controlling your thermostat, limiting your light usage, closing your window curtains, and following a schedule to save money on your electrical bill. Regardless, the utility company can and will make you pay their increasing utility rates and they can do so, rightfully.

Why Is My Electricity Bill So High?

Because utility companies are public necessities and the only supplier of a commodity in particular regions, they are considered to be a natural monopoly. A natural monopoly is a sole provider of a product or service in an industry or geographic location, fitting the description of most utility companies.

According to the U.S. Supreme Court case -The Binghamton Bridge (1865) The court stated “If you will embark, with your time, money, and skill, in an enterprise which will accommodate the public necessities, we will grant to you, for a limited time period or in perpetuity, privileges that will justify the expenditure of your money, and the employment of your time and skill.”

What Is The Regulatory Compact?

However, these natural monopolies (utility companies) are regulated through the regulatory compact. This rule grants the utility company advantages & privileges as long as they continue to invest money back into their business and continue to accommodate “public necessities”. In exchange, the state's Public Utility Commission regulates how much the utility companies can charge, company interest, and how much a company can profit.

How Has This Affected Utility Companies?

The regulatory compact surely helped advance the development of better and more infrastructure in the early days for more people to use electricity but it was not long after the utility companies began to utilize it for greater advantage. In recent years, utility companies have come under scrutiny because of its failed practices and contentious settlings.

In California, one of the largest utility companies declared Chapter 11 Bankruptcy before the catastrophic 2019 wildfires caused by their own equipment. They are now rushing to put together a $57.6 billion reorganization plan to exit bankruptcy by the end of June 2020; issuing, more strict safety practices, stricter oversight, adjusting its board and reorganizing the management structure. They are doing so to qualify for a $21 Billion Wildfire fund (AB-1054)that will pay eligible claims to victims caused by the utility infrastructure.

The Wildfire Fund & What Consumers Can Expect

AB 1054 refers to a California law passed last year (2019) that established an insurance fund to protect private utilities from future wildfire liabilities. The Wildfire fund (AB-1054), is expected to be funded with approximately $21 billion from utility ratepayers and shareholders. In other words, customers (utility ratepayers) will soon see increasing utility rates.

What You Can Do About It

Current natural monopolies (utility companies) will not stop their rate increases and will expect you to pay. In situations as mentioned above, you will continue to see higher electric bill prices much sooner. As a homeowner you do need certain public necessities, but you do not have to depend on them. Take control of your spending.

Save On Utility Bills By Investing In Solar

Knowing this information, you may want to consider possible alternatives to control your spending and what you will have to pay as a homeowner in the near future. The alternative is solar; having a solar system will not only power your home for less but you will also not have to succumb to all of the utility company increasing rates.

For more information on how solar can help you save, reach out to SunPower by Quality Home Services today.

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