December 3, 2024
Mr. Peter M. McCoy, Jr., Chairman
Santee Cooper Board of Directors
1 Riverwood Drive
Moncks Corner, SC 29461
Re: Santee Cooper 2024 Request for Adjustment to Rate Schedule and Tariffs
Dear Chairman McCoy,
On behalf of the South Carolina Small Business Chamber of Commerce and the Southern Alliance for Clean Energy, we are providing the below concerns and request for a pause in the Santee Cooper Board of Director’s (Board) upcoming, December 9th, vote on the subject referenced above.
The Board contracted the Regulatory Assistance Project (RAP) to evaluate the management rate proposal. That review was completed this past September.
Several of the concerns listed in the RAP review were also included in our comments submitted to Santee Cooper management (management) and Board on September 13, 2024.
The Board contracted with RAP because of that organization’s reputations as an independent, global non-governmental organization working to help utility regulators improve energy planning for over 30 years.
Thus, we are concerned that the Board may be preparing to approve management’s proposal, with one very minor change, and without more fully addressing RAP’s concerns and suggested changes.
RAP’s review uncovers serious flaws in the management’s proposed default “demand charge” rate schedule that will seriously impact residential and small business customers.
Key observations of the RAP review are:
- “The peak demand charge, as proposed in the 2024 request filing, has not been shown to be superior to a similarly structured time-of-use kWh rate.”
- Only a few electric cooperatives outside of South Carolina have implemented the proposed demand charge schedule for “a broad residential customer class.”
- “Demand charges in general have additional complexity for small consumers to understand and properly manage compared with most forms of kWh rates, including time-of-use rates.”
- The impact of the proposed demand charge rate design is “not proportional across all customers.” As shown in the NewGen study used by management, “25% of residential customers could see their bills increase 20% or more when the proposed rates go into effect” even though “the overall residential customer class is slated for an 8.7% increase.”
The stated objective of the proposed demand charge for residential and small business customers is to incentivize customers to use less energy during peak demand periods when, as stated in the RAP review, “the least efficient and most costly plants run to ensure reliability.”
However, for this objective to be achieved residential and small business customers need to understand how the rate structure works and accept the results. “Prices should not be so complex or convoluted that customers cannot understand how their bills are determined or how they should respond to manage their bills,” states the RAP review.
According to the RAP review:
(A) peak demand charge contains an additional layer of complexity for customers to understand and manage. For example, if a customer sets a high demand early in a billing period (accidentally or on purpose), there is less of an incentive to reduce usage in peak hours for the rest of that billing period.
One of the criticisms of demand charges for small customers is that they are a trap for the unwary or uninformed. This is particularly true for demand charges with shorter integration periods. For shorter periods, it is easy to accidentally have major appliance usage overlap during a month without the time to realize and react, particularly since many appliances cycle on and off automatically (e.g., electric water heaters).
Regarding RAP’s concern about a shorter integration period to set the demand charge, this is a serious problem for small business customers. The management’s proposal has a demand charge integration period for small business customers based on the highest energy use during any 30 minutes of the month’s peak demand period compared to the 60 minutes for residential customers, which is also too short. Making matters worse for small business customers, that class is not even given the opportunity to switch to a TOU design as residential customers can do if they do not like the demand charge rate.
RAP thus suggests that Santee Cooper consider a TOU energy rate for the residential and small business customers with on-peak, off-peak, and super-off-peak periods. This approach would provide a more consistent and fair price signal for residential and small business customers to take action to help reduce system costs. RAP also suggests that this TOU energy approach would be less susceptible to revenue fluctuations because it would not provide a dramatic, narrow “cliff” between on-peak and off-peak periods.
We are concerned that there has been no public indication in the record that the Board or management of Santee Cooper has given serious consideration to RAP’s suggested alternatives. We believe that RAP’s suggested approach would meet the Board’s revenue objectives, provide a more consistent price signal to customers to reduce peak demand, and more fairly distribute the rate increase among small customers without arbitrary outcomes and confusion.
While Santee Cooper is deserving of additional revenue, we believe the Board should not vote on December 9th to implement management’s proposed rate design.
We call on the Board to pause and explore the alternatives outlined by RAP, which has expressed its willingness to answer questions from the board on topics in this memo and can assist the Board and management in developing a new plan.
Sincerely,
Frank Knapp Jr.
President & CEO
South Carolina Small Business Chamber of Commerce
803-600-6874
fknapp@scsbc.org
Eddy Moore
Director of Decarbonization
Southern Alliance for Clean Energy
501-772-5426
eddy@cleanenergy.org
cc: Santee Cooper Board of Directors