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Posted: July 01, 2010

Rundles wrap up: the stickup

Jeff Rundles

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A few years ago, mired in a drought, Denver Water called on customers to conserve water, and the populace responded with aplomb. Water usage decreased so much - in fact more than the water utility anticipated - that ultimately it had to raise the rates to make up for the shortfall in revenue.

You could argue that higher rates are even more of an incentive to conserve, but still it's a fine "how do you do" and thank-you for responding to a crisis with such a collective public spirit.
Fast-forward to 2010, and there's another "conservation" effort going on that simply masks a way of raising more revenue by appearing "green." Xcel Energy, the state's largest utility, on June 1 instituted a new two-tiered rate structure, covering the summer months from June 1 through Sept. 30, "to more accurately reflect the cost of providing electricity to customers" that is "higher in the summer."

Basically, a lower Tier 1 rate will apply to electric usage for the first 500 kilowatt hours, and a higher Tier 2 rate will apply on usage over that threshold. Xcel estimates 60 percent of its residential customers use at least 500 kilowatt hours during the summer months, meaning that they will pay more. The lower Tier 1 rate will apply to all electric usage for everyone in the other eight months of the year.

Xcel says on its website that customers will "probably not pay much more or less" under the new system, and also that the company itself will not collect more money from customers than under the old system. This simply begs the question: then why do it? If the object is conservation, as is implied in the justification, and it is successful at that, then the utility will return to the Public Utilities Commission to ask for a rate increase to cover the "cost of service as approved by the PUC."

Presumably, the cost of service, and, of course, as they say, "handling charges," will inevitably rise as it is not necessarily based on usage, but rather potential demand. Once again, like with water, if we are collectively successful at electrical conservation, rates will rise. This tiered system is a method of virtually guaranteeing future rate increases.

Using this same logic, I guarantee that parking rates at parking meters throughout Denver also will rise, and once shown to be profitable and accepted by the public, they will rise everywhere else in the state, too. The reason is all the new so-called smart meters. These solar-powered devices now rapidly replacing all of the old, standard meters have the extra advantage that they can accept credit cards, instead of just coins.

As a result, more people are paying the full amount of the time allotted or needed, and the parking ticket revenue is down. So far the city is saying that it is no big deal, that parking and ticket revenue is but a drop in the bucket, but it won't be long before their parking rates are hiked to make up for the shortfall in ticket revenue. It's just the way government - and utilities regulated by governments - operates.

This sounds as if I am against rate increases. I am not necessarily. We do need a healthy power company to ensure our infrastructure remains the best in the world. And I like the new parking meters and the flexibility it affords parkers, and if managed properly the parking situation, especially downtown, will improve.

What I object to is the process. PUC hearings and deliberations are complex and boring, but the tiered pricing system doesn't strike me as the best way to achieve conservation. Economic incentive ought to be a way for me to actually save money if I so choose. Instead of rewarding those who conserve, which is proper, we rather have decided to penalize everyone, with the penalties higher for the less frugal. No carrots; just different sized sticks.

As for parking, I can hear it now: People would rather pay higher rates than tickets. So, we're raising rates. Again, just different sized sticks.

I don't want to throw water on conservation and parking-violation-avoidance dreams, but c'mon: Am I the only one who feels like they are walking softly but sticking it to us nonetheless?
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Jeff Rundles is a former editor of ColoradoBiz and a regular columnist. Email him at jrundles@cobizmag.com.

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