Present Utility Pricing

The current system of declining block rates penalizes the poor and other low energy consumers by making them pay for their economical ways. The more the household cuts its energy consumption, the higher the unit rate it pays. The household's energy bill is reduced, but not in proportion to the amount of energy conserved. Declining rates encourage greater and greater consumption among the affluent by rewarding them with reduced rates. A flat rate structure among residential users, with escalating peak-period charges for electricity, would relieve both the inequities of declining block rates and the unnecessary encouragement of consumption in this period of increasing energy shortages. Peak-period surcharges on electricity would discourage use of energy at such times and also reduce the amount of plant and equipment a utility would have to keep in reserve. Exemptions to equalizing rates could be made for existing users of electric space heat in an adjustment period.

Increasing rates for residential consumers without reducing the gap between low and high users (as has been the case in the past twenty years) can have a particularly serious impact on the poor. Electricity and natural gas already take over one-tenth of the income of the poor. Since the poor have already cut their consumption to the bone, rising prices cause real hardship.

Utility rates for all residential consumers could be cut if the trend toward equalizing price differentials between residential, commercial, and industrial users was accelerated. Utility rates could also be cut if regulatory commissions would require utilities to reduce their advertising and to pay for advertising out of profits instead of passing these costs directly on to consumers.

Much more effort needs to be devoted to finding ways of conserving energy in the United States, but this is not the only issue: maldistribution and inequities must be addressed, as well as present and future shortages.