Should you pay a flat monthly charge for electricity?
An offer comes in the mail today from Georgia Power, a Southern Company whose stock I sold a few weeks ago. Southern Company has gotten into some hot water lately, trying to build two nuclear power plants here in Georgia and a "clean coal" plant in Mississippi. While at the time these were planned, they seemed like forward-looking high-tech solutions to the energy problem, but since then, cheap natural gas has flooded the market, making both plants unprofitable. Cost overruns sealed the deal and bankrupted Westinghouse and threatens to destroy Toshiba.
The missive in the mail today offers an interesting bargain - their Flatbill program allows me to pay $180.32 a month for electricity for 12 months, no matter how much I use, even though this is $8.56 more per month than my average usage. This is not their old Budget Bill where you paid a flat rate based on average consumption, and then at the end of the year, were issued a credit (or paid the deficit) on the actual amount used. This really is a flat-rate plan. You use as much juice as you want, and pay a flat fee.
What's the catch? Why would they offer this?
Well the second answer is easier to figure out. For residential customers, the amount collected in fees is more of a pain-in-the-ass for most utility companies. Metering power and sending out meter readers is expensive. Their big customers (business and industry) pay most of the cost of running the utility company - and they pay by peak usage, not by metered usage. Individual consumers are just, well, a nuisance. So if you could get people to go to a flat-rate plan, such as Budget Bill or Flatbill, you don't have to read the meter - not even electronically - for 12 months.
In a way, it is like the "too cheap to meter" promises of nuclear power in the 1950's. Just charge a flat fee for "all you can eat" and be done with it. There are billing savings for the utility. And given how much wiring you have in your home, "all you can eat" is limited to how much power a 200 Amp service connection can deliver. So it is not unlimited energy, but then again, you can only use so much, anyway.
So what's the catch? Why not sign up and then leave all the lights on, and turn the A/C down to 60 and the heat up to 80? What is the incentive to conserve energy?
Well, it is still there. Your next year's flatbill will be based on last year's consumption. So if you waste energy, your bill next year will reflect that. There Ain't No Such Thing As A Free Lunch! So they catch up with you, eventually. You sign up for one year, and the next year, your Flatbill will become a Fatbill - it will skyrocket if you consume more energy than you normally do.
In addition, you are paying, in my case, $8.56 more a month for juice, to cover "overages, etc." or about $102.72 in excess charges. In other words, nearly a month's energy bill extra.
It is an interesting concept, but it doesn't pass the stingy test. With the current billing system, where I pay by the kilowatt-hour, I have some control over my destiny. If I turn off a light, I pay less. If I switch to LED bulbs, I pay less. If I turn the A/C thermostat up to 78 (where it is today) I pay less. If I put in energy-saver windows, I pay less. If I leave the front door open and the A/C on, I pay a heck of a lot more.
The Flatbill plan disconnects usage from savings. If I do any of these energy-saving things, I do not see any immediate result, until they Flatbill resets for next year. Only then might my bill go down. If I indulge myself, knowing the bill won't go up right away, when the Flatbill resets for next year, it maybe well over $200 a month (with a higher "add-on" fee as well).
If my energy consumption stays the same, I pay an additional $102.72 a year for "convenience" - and we all know what Sooze Orman says about "convenience" now!
If my energy consumption stays the same, I pay an additional $102.72 a year for "convenience" - and we all know what Sooze Orman says about "convenience" now!
The temptation is - and it is temptation - to sign up for this and say, "Yahoo! I can now use electricity like it's free!" And for a few months you may get away with that. And maybe you could sign up for a year and live this way and then go back to regular metered billing. Perhaps. But you'd better time this precisely, as it appears to be a negative-option contract. You sign up for 12 months, and you then have to cancel after the 12 month period but before the Flatbill automatically renews (according to the terms of the letter sent to me). If you withdraw from the plan within a 12 month period, you have to pay the excess electricity you used above that billed under the Flatbill plan. So if you go way over $180.32 a month (in my example) and cancel 11 months and 29 days later, you have to pay for all that excess usage. Wait too long to cancel renewal, and you are automatically renewed in a new plan - and the same cancellation terms apply.
And they ain't giving away the store - if your usage is 50% or more than the previous year's usage for the same month, you may be kicked back to the residential metering plan, just as if you cancelled before the 12-month contract was up, and forced to pay the difference. This last part is troubling to me, as we travel in the summer months, and our monthly bills can vary wildly. For example, last month's bill was over $300 with the early summer heat. Last August's bill was $78 as we were away and left the thermostat set at 85 degrees. If we were here in August, our electricity bill would easily exceed 50% more than $78 and kick us out of the plan.
The more complicated you can make any financial transaction, the easier it is to fleece the consumer. And in this case, you are signing a contract - one with a whole back page of fine print terms that spell out bad things that will happen to you if you don't follow the rules, but not a lot of bad things that happen to Georgia Power. You pay more, but you get the same, basically. The are selling "Peace of Mind" and you know how I feel about that. The plebes latch onto this sort of crap, as they are living paycheck-to-paycheck and the high electric bills of summer always come as a surprise to them. Plus, they are fervent believers in free ponies.
So the idea that you are getting "free electricity" or that you no longer need to conserve energy is flawed. If you really waste power, they toss you out of the plan. If you use a lot of juice, your next year's Flatbill rates will go up. At best you may be able to "scam" Georgia Power for a year, but the next year, you'd have to drop out of the plan, otherwise be zinged with a high flat-rate plan. And when you drop out, be very careful of the dropout dates and deadlines as it is a negative option plan. I don't mind being negative option with Georgia Power, but on a month-to-month basis, please!
This offer does illustrate how residential customers are more of a nuisance than anything to a utility, and how much energy we consumer is secondary to the very fact we are connected to the grid and have to be billed (and they have to collect). It also illustrates how our natural gas glut has made power a lot cheaper - and if it weren't for these ill-fated power plant projects, we'd be paying a lot less for electricity!
Paying nearly $10 more a month on my electric bill for "convenience" doesn't seem like a big "savings" to me. I think I'll take a pass.
UPDATE: A reader notes that just the way the deal is presented - with a flashy brochure and lots of fine print on the back of the "letter" tips the whole thing off. You can spot a bad deal at 100 paces, over time, just from the way it is pitched to you.
UPDATE: A reader notes that just the way the deal is presented - with a flashy brochure and lots of fine print on the back of the "letter" tips the whole thing off. You can spot a bad deal at 100 paces, over time, just from the way it is pitched to you.
