Poor customers overcharged $4 million a year for electricity, says Franklin County lawsuit

A class action lawsuit has been filed against the Franklin Public Utility District, saying its rates unfairly burden its poorest customers.

Those lowest paying electric users are paying $4 million a year to subsidize commercial and business users as well as the wealthier customers in luxury homes, claims the lawsuit.

Residential customers are charged for both a fixed monthly base rate and a kilowatt rate for the amount of electricity used.

Since 2013 the PUD has twice increased the monthly base rate, saying it wanted to make sure that each residential customer paid the household’s fair share of the cost of delivering the electricity and making sure it was constantly available.

That year the monthly base rate charged to each residential customer was $11.45. After being raised twice, it is now $34.

At the same time the charge per kilowatt hour has dropped from 7.31 cents to 6.73 cents.

The lawsuit filed in Franklin County Superior Court says that the relying more heavily on the base rates unfairly burdens residential customers, particularly those who use the smallest amount of power.

It can actually lower the cost for residential customers who use the most electricity, and it maintains good rates for large corporate customers, the lawsuit alleges.

Low income overcharged $4 million

“This is especially disturbing because these low consumption customers tend to live in smaller dwellings and apartments, and tend to be both lower income and Hispanic,” wrote Kennewick attorney Douglas McKinley in a letter notifying the PUD of the lawsuit before it was filed.

He contends that the rate structure of the Franklin PUD effectively transfers $4 million per year from low income Hispanic customers to subsidize both commercial customers using large amounts of electricity and also relatively wealthy residential customers.

The lead plaintiff in the case is Tyson Fellman, who lives in Kennewick but owns property in Pasco. He is a member of the Franklin PUD Rate Advisory Committee and ran for a seat on the Benton PUD Commission last year, but lost in the primary election.

The Benton PUD also has increased its base rate for residential customers and Fellman argued during his campaign that the increased base rates for both utilities were the result of a flawed rate design method.

McKinley argues that the base rate allocates too much of Franklin PUD’s fixed costs to residential customers.

Private utility regulator cited

He also says that the Washington Utilities and Transportation Commission, which regulates private sector utilities in the state, has found that the method used by the Franklin PUD to set base rates is flawed and does not allow private utilities to use the method.

The base rate set by the Franklin PUD is about four times higher than would be allowed if it were a private utility regulated by the state commission, according to McKinley.

He uses the example of a customer that is in the bottom 10 percent for the Franklin PUD based on electricity used.

A customer using 286 kilowatt hours of electricity per month would be billed $52.17 a month, effectively paying 18 cents per kilowatt hour.

A wealthy neighbor in the top 10 percent of Franklin PUD customers based on electricity used would consume 2,529 kilowatt hours of electricity per month and would be billed $196.61, effectively paying just under 8 cents per kilowatt hour.

The lawsuit seeks the money Franklin PUD customers were allegedly overcharged plus punitive damages.

Judge makes initial ruling

Plaintiffs have cleared an initial hurdle in the case.

On Friday, Judge Cameron Mitchell declined to dismiss the lawsuit, as requested by the Franklin PUD.

The PUD had argued that its elected commissioners have the legal authority to set rates and that it sought and heard public comments and worked with its Rate Advisory Committee to set fair rates.

Mitchell ruled that the court has the authority to review a PUD’s rates to determine if they are fair and non-discriminatory, according to a statement from the plaintiffs.

“This is a very significant ruling, because all of the facts alleged in our lawsuit are easily proven, as they are all essentially matters of public record,” McKinley said.

He said he hoped that the Franklin PUD will negotiate with plaintiffs to return rates to close to prior levels so the lawsuit can be ended without a drawn out and expensive legal battle paid for by PUD customers.

PUD defends rate structure

The Franklin PUD said that it adjusted its rate structure to depend more on a base rate and less on a charge per electricity used with the help of a consultant widely used by public utilities.

The PUD said during public discussions of a second increase to the base rate in 2015 that the monthly cost to have service available to a home is closer to $38 a month than the $34 it settled upon.

If the base cost is not raised, then those not using electricity each month are subsidized by other ratepayers, said Commissioner Roger Wright. Those would include “snowbirds” who leave the Tri-Cities to spend winters in warmer areas.

Ratepayers with their own solar array also are low users of electricity.

The Rate Advisory Committee heard concerns that the change in the rate structure could be potentially devastating to low-income customers, particularly those with fixed incomes, said a letter from the committee to the commission.

Least negative impact on poor

The committee concluded that as rates need to be increased, raising the residential base charge would have the least negative impact on low- and fixed- income customers while meeting the goal of collecting actual cost of service.

The Franklin PUD has said that the base charge covers costs such as substation upgrades, poles, lines, meters and meter reading needed to have electricity available at all times to its ratepayers.

The PUD also takes issue with the assumption that low electricity use correlates with low income residents.

In fact, many low income residents may have homes with poor insulation and single-pane windows that increase their use of electricity, said spokeswoman Debbie Bone-Harris.

McKinley agreed that some low-income residents cannot afford upgrades to make their homes energy efficient, but the majority of those using low amounts of electricity are low-income residents living in small apartments, he said.

“Across the board, energy consumption correlates with wealth,” he said.