“They tell me I used it and I can’t argue with it. But I have a hard time believing I used that much [electricity],” David Meade said. “I had them [BVU] come out and reread my meter and they suggested an energy analysis, but all they would basically say is ‘you used it.’ ”
By David McGee
Staff Writer / Bristol Herald Courier
Published: February 22, 2009
BRISTOL, Va. – As a car dealer, David Meade understands sticker shock.
He’s seen customer’s eyes widen and facial expressions change when they realize the asking price is higher than expected.
The Washington County, Va., resident experienced the phenomenon for himself in mid-December – when he opened his electric bill. The computer-generated single sheet carried several startling numbers, but none more eye-opening than the bottom line – $612.
“They tell me I used it and I can’t argue with it. But I have a hard time believing I used that much [electricity],” Meade said. “I had them [BVU] come out and reread my meter and they suggested an energy analysis, but all they would basically say is ‘you used it.’ ”
The Herald Courier received nearly 100 telephone calls, e-mails and letters from irate customers across the Twin City that month. The overwhelming majority were Bristol Virginia Utilities customers, and none complained that their bill was too low.
The newspaper’s two-month review of electricity rates revealed the obvious: Customer bills doubled, tripled and, in some cases, increased even more – almost overnight.
The causes appear to be a perfect storm of continually escalating rates, unusually cold periods in November and December and a general unfamiliarity with the fuel-cost-adjustment charge that rose more than six-fold from January to October 2008.
Over the past 20 months, BVU customers have sustained two increases blamed on the need to charge rates comparable to other Tennessee Valley Authority suppliers and two additional base rate increases during 2008. Additionally, they began paying a separate fuel cost adjustment in January 2008, and saw that fee increase three times during the year.
The result was record power bills in December.
Electricity is sold in kilowatt-hours, a measurement of energy equivalent to operating a 1,000-watt appliance for one hour.
TVA, which supplies power to both BVU and Bristol Tennessee Essential Services, estimates that the average residential customer will use 1,325 kilowatt-hours a month.
Meade was billed for 5,479 kilowatt-hours, primarily to warm his 3,800-square-foot home that month.
“In December, we get hit with everything from property tax in Washington County, to home insurance, auto insurance and Christmas,” Meade said. “Then my BVU bill goes from $241 in November to $612 in December. And $103 of that was a fuel surcharge.”
Peggy Crosswhite, of Bristol, Va., saw her electric bill leap from $57.90 in November to $333.17 in December and her usage in her small house climb from 450 kilowatt-hours to nearly 3,000.
Chris Fleenor, Meade’s neighbor, said his usage doubled during that period – from 1,440 kilowatt-hours to 2,990 – and the bill went from $175.96 to $345.80.
Rick Shortt, also of Bristol, Va., said his bill also doubled, going from $251 to $511.
“I’ve seen it so cold my heat pump didn’t cut off, and my bills have never been like this,” Shortt said.
Despite being hospitalized for more than a week in December, with no one staying at his Bristol, Va., home, Jerry Olney’s electric bill hit $380.
Ernest and Allison Deggs, of Bristol, Va., compared their December 2008 bill to the same month in 2007. It showed their usage rose from 1,472 kilowatt-hours in 2007 to 1,980 in 2008. The bill increased from $127.93 to $233.85.
“He had a heart attack,” Allison Deggs said facetiously of her husband. “We’ve switched light bulbs to conserve energy, turned down the heat to 68 degrees, covered the windows with plastic and closed off the bedrooms.”
Meade said nearly all of his neighbors in the Benhams community, just outside the city limits but served by BVU, saw power bills double or increase dramatically during that same period.
“The bottom line is we just want to feel like we’re getting a fair shake,” Meade said.
Reasons
BVU officials said there are obvious reasons the bills were higher. During the fourth quarter of 2008, electric bills included the TVA’s higher fuel-consumption charge, called the fuel cost adjustment, in addition to newly increased base rates. And temperatures fell to sometimes record levels from November to mid-December, causing electricity use to increase dramatically, BVU records show.
Total residential electric use increased from about 14 million kilowatt-hours in November to about 24.7 million in December for its 13,697 residential customers, BVU officials said.
That represents an average use of 1,752 kilowatt-hours for each household.
The December 2008 total is comparable to January and February use, when temperatures are historically lower and power use peaks.
Compounding the issue, the increased demand followed mild September and October periods, when power consumption was well below average for those months.
In December 2007, BVU reported residential customers used about 5.5 million fewer kilowatt-hours of electricity – an average of 1,396 a customer.
The demand for power was similarly higher for Bristol Tennessee Essential Services. From November to December, the utility’s more than 28,000 residential customers used about 20 million more kilowatt-hours – going from 34.1 million to 54.3 million. That represented the third-highest usage month in 2008 and about 10 million more kilowatt-hours than in December 2007.
BVU President and CEO Wes Rosenbalm said electric-bill sticker shock happens every year when temperatures drop.
“When people get that first bill after it gets cold, the phones here start to ring,” he said.
BVU also received an increase in calls and visits from customers complaining about higher bills, said Brian Bolling, vice president of customer service, but he was unable to quantify that increase.
The utility received about 7,800 telephone calls in November and about 7,000 in December – but its records don’t show a breakdown among complaints, requests for service, or any other service function or question.
During 2008, BVU averaged about 7,100 calls a month.
BTES President and CEO Michael Browder said the number of calls received by BTES’ customer service also increased in December. From Dec. 12-18, customer calls shot up to about 200. But the calls fell to about 150 a week through December and the first week of January, then dropped to just over 75 in the second week of January and about 40 calls the week of Jan. 16-22.
Browder said the spike in calls, which are not just complaints but billing concerns and other questions, was typical for that time of year.
“There are people that get in a bind every month, and some of these complaints are the same people that call in saying they can’t pay their cable or Internet,” Browder said.
Fuel cost adjustment anger
Regardless of the provider, much of the consternation is directed at a separate charge called the fuel cost adjustment. Initiated by TVA in late 2006, the charge – collected by the utilities and paid entirely to TVA – is designed to offset what TVA spends to buy or produce electricity.
“There is no markup on FCA. It is a straight pass-through,” Rosenbalm said.
It was established because energy markets were becoming unpredictable and to keep TVA from seeking regular changes to the base rate it charges for electricity.
Over the past four fiscal years, TVA said it has bought almost twice as much electricity from other sources compared to earlier this decade. In fiscal 2005, purchased power represented 6.8 percent of TVA’s total supply, compared to 11 percent in fiscal 2008.
By contrast, lower-cost hydroelectric production has decreased from almost 12 percent four years ago to less than 5 percent last year – primarily due to drought conditions throughout the region.
Regardless of the reasons, Meade, the BVU customer from Washington County, calls the charge outrageous.
“It’s unbelievable that the fuel charge for a residential home is $103. It’s not right,” Meade said. “It should be no more than $50 for a residential customer. And if TVA can’t operate within its limits, it should restructure its business footprint.”
TVA spokesman Gil Francis said the fuel cost adjustment has become the industry standard.
“Nationally, most if not all utilities have a fuel cost adjustment. It was implemented in response to the dramatic increases in price for coal and natural gas,” Francis said. “The FCA is adjusted quarterly because the prices of these materials that TVA uses to run power plants have been very volatile.”
While the fuel cost adjustment rose twice in 2008, it was reduced in January and will drop again in April because the international energy market has gotten softer, Francis said.
TVA documents reveal that its fuel cost adjustment for BVU customers rose from 0.028 cents a kilowatt-hour in January 2008 to 1.891 cents during the fourth quarter of 2008. It was lowered to 1.392 cents in January.
That means a 2,000 kilowatt-hour customer who paid a $5.60 fuel charge in January 2008 can now expect to be hit for $27.84. During the fourth quarter of 2008, it would have been $37.82.
The charge is revised every three months, depending on market conditions. In August, TVA announced it would increase the fuel-adjustment charge by about 20 percent on Oct. 1. That rate was subsequently reduced by about 6 percent on Jan. 1.
“A lot of consumers hear natural gas prices are down and look at what a barrel of crude oil costs these days. They think everything ought to be going down,” BVU Chief Financial Officer Stacey Bright said. “Five or six years ago, the correlation between all these energy commodities worked. When one moved, the other ones did, too. That doesn’t work in the coal market today because of the exports to China.”
Currently, the fuel charge for BTES customers is 1.423 cents a kilowatt-hour. Browder, in a letter to customers, also mentioned the demands created by China.
“Last year, China added coal [electricity] generation plants that will generate more than six times all of TVA’s [coal-fired] generation plants. More than six times in one year,” Browder wrote. “China was an exporter of coal and now they’re using it all.”
Electric rates
Aside from the fuel charge, BVU officials are quick to point out that TVA is largely responsible for determining the rates consumers pay.
“When we signed the contract with TVA, we signed not just to buy power from them but to be regulated by them,” Rosenbalm said. “We went through the iterations in-house of looking at our wholesale cost for power, depreciation and [electric system] debt for what we think the rates should be starting out. We had to submit that to TVA and they have a whole group that looks at that and either blesses what your rates are or not.
“The BVU board [of directors] has the ability to make a recommendation for rates, but the TVA group has to approve that. TVA has the final say,” Rosenbalm said. “I think there is the impression we can do what we want to and that is absolutely not the case.”
Documents obtained by the Herald Courier show that 81 cents of every dollar paid by BVU electric customers goes to TVA. The balance includes 9 cents for general and administrative costs, 5 cents for operations and maintenance of the electric system equipment, 4 cents for depreciation and 1 cent for taxes and fees.
“Of a $200 electric bill, BVU has control of $28,” Rosenbalm said.
On the subject of debt, BVU’s electric system currently owes about $18 million, which accounts for about 2 percent of the general and administrative costs. TVA regulations forbid BVU and other providers from charging any other debt – such as its OptiNet telecommunications division – to its electric system, Rosenbalm said.
Francis, the TVA spokesman, said each provider is assessed individually, based on anticipated operating costs.
“We sell wholesale to 159 distributors and each distributor’s operating costs vary,” Francis said. “A larger, municipal distributor with a large business and industrial base – their cost may be less per customer than a rural system with little or no business and industry, that is spread over a wide area.”
Billing periods
There was another obvious reason that David Meade’s bill – and many others – were higher in December: The bill covered a 38-day period, or about a week more than average.
“I’ve been told that’s how they run their routes,” Meade said. “One month it may be a 38-day cycle, the next it may be 30. They should not charge people for more than 30 days.”
Fleenor, who also lives in Washington County, also criticized BVU for his bill which covered a 35-day period in mid-December.
“Whether the [electric] rates changed or not, in December we’re hit with personal and property taxes due and Christmas, and then we get billed for 35 days,” he said. “BVU doesn’t seem to have any compassion for people trying to make ends meet. That needs to be changed. My September bill was for 25 days. We need to have 25-day bills in December and January.”
Fleenor said his previous record bill was less than $260 and he was stunned when his December statement was for $345.
BVU officials said they’ve heard much about the extended billing period and are taking steps to ensure that future bills average 28-32 days.
“We had some swings in the time periods on our meter-reading cycles,” Rosenbalm said. “It’s somewhat of a manpower issue. We have four meter readers and one service man. We are making sure we help those customers with that, so you don’t have one month with a 35-day cycle and another with 28.”
Rosenbalm said BVU plans to use existing employees and schedule overtime periods rather than hire additional workers.
“We plan to block the range from 28-32 [days] and do what we have to, to get to that and control the cost,” Rosenbalm said. “We recognize that is a problem and we’re working to address it.”
BTES
Customers of Bristol Tennessee Essential Services, which serves customers in Bristol, Tenn., and a portion of Sullivan County, also had plenty to say about their bills.
“Our bill that covers part of November and part of December was about $480, when you subtract the charges for telephone and Internet,” June Hartley of Bristol, Tenn., said in a phone interview. “But the previous bill for electricity was $268. That’s climbing up to almost double the last bill.”
The bill she and her husband, Dalton, received for part of December and January was more than $430. Although the bill reflected about 100 more kilowatt-hours used, it was slightly lower thanks to a $23.29 credit received for the drop in TVA’s fuel-cost surcharge Jan. 1.
In August, Donna Tomblin and her husband, Norman, moved from a mobile home to a rental in Bristol, Tenn. Their electric bill had been around $200 a month, but in December it climbed to $361.
“This is not an easy amount of money for us to come up with as my husband is on disability and I can’t work due to an injury back in February 2008,” Donna Tomblin said. “His income is all we have to go on, which is a mere $1,100 a month. The rent here is $400 a month, with the water bill and a couple of other small bills that we have, we barely make ends meet.”
Retiree Henry Wisdom of Bristol, Tenn., said he was “blessed” to get a part-time job late last year, after his $322 electric bill arrived.
“Otherwise, I couldn’t have paid that bill and they would have turned my service off,” Wisdom said. “The Lord blessed me this time.”
Staff writer Gary Gray contributed to this report.
dmcgee@bristolnews.com| (276) 645-2532
