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Service Availability Fee

 

Understanding the Service Availability Charge

Have you ever wondered what the Service Availability Charge on your electric bill is for?  If so, you are not alone as this is a frequent question asked by GCEA’s members.  Hopefully, after reading this information, you will have a better understanding about the Service Availability Charge as well as how you are billed for your residential electric service in general.

 Typically there are two separate charges for electric service on a residential customer’s bill.  One is the Energy Charge and the other is the Service Availability Charge.  

The Energy Charge is easier for most members to understand in that it has a direct relationship with the amount electricity consumed during the billing period.  For residential services, the Energy Charge includes both an energy and demand component and directly relates to the costs associated with the generation and transmission of electricity.     It is billed on a rate per kilowatt hour (kWh).

The Service Availability Charge, on the other hand, is billed each month as a flat fee and does not vary with electric usage.    Service Availability Charges are sometimes called service charges, minimum charges, facility charges, base charges or customer charges.  This fixed charge is necessary because GCEA incurs costs regardless of whether any electricity is sold or not.  In other words, even if you do not consume any electricity during your billing period, GCEA still has to pay costs associated with meter reading, billing, customer service, property taxes, insurance and in keeping your facilities in place and maintained, ready to serve  24 hours a day, 7 days a week. 

To better understand a fixed charge here is an illustration of how a small irrigation ditch company might establish such a charge.  Let’s say that four neighbors dig a mile long irrigation ditch.    They create a ditch company and hire an employee to keep the ditch clean and well maintained.  Labor and materials come to $1,000 per year no matter how much water is run in the ditch.  So, all neighbors pay a fixed charge of $250 a year for ditch maintenance.  All four neighbors use different amounts of water, and they pay for that water separately based on their usage.  But everyone pays an equal share of the fixed costs.  The neighbor who uses less water may feel that he is paying too high of a fixed charge.  But, it costs the ditch company just as much to maintain his ¼ mile of ditch.  The fixed charge has nothing to do with how much water he uses.  Without a fixed charge, the maintenance costs would have to be added to the cost of the water.  If that were the case, the small water users would be subsidized by the larger water users.

Most utilities charge a fixed charge.  You may notice a similar fixed charge on your phone bill that is typically around $30 regardless of whether you use any service or not.  This $30 is for poles, wires, taxes, insurance, postage, billing and other fixed overheads that do not go away when the phone company’s customers don’t make any phone calls.  These expenses are comparable to the types of charges that an electric utility would still incur if its customers didn’t use any electricity.

The size of the fixed charge can vary greatly dependent upon “customer density”.  “Customer density” is the number of customers per mile of line.  Typically, the more customers per mile of line the lower the fixed charge because there are more customers to spread those expenses across.  Electric Cooperatives such as GCEA that serve rural areas have a much lower density (or less consumers per mile of line) than utilities that serve a higher density area.  Consider the higher density of customers served by a municipality such as the City of Gunnison compared to the lower density of customers served by GCEA.  Taking customer density into consideration, it is understandable that GCEA’s Service Availability Charge is higher than the City of Gunnison’s fixed charge per customer.

Hopefully, the above information will help you better understand the Service Availability Charge.  Fixed charges are necessary to establish fair and equitable rates.  Just remember, it is the Service Availability Charge that allows you the benefit of electric service with just the flip of a switch.

 

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