KCP&L’s new Budget Billing program can make budgeting more difficult
Under KCP&L’s new budget billing program, more than a third of its budget customers saw their monthly payments climb in August, the first time their bills could change using the revamped plan.
August’s increases hit 37 percent of the 150,000 consumers on Kansas City Power & Light’s program that helps spread high summer cooling bills or high winter heating bills throughout the year.
The number of customers affected in August is less than the 57 percent who saw their budget bills increase in July, with 900 of them increasing by more than $100.
July’s increases had accounted for an abnormally hot May and a hotter-than-usual June, KCP&L said. They also meant everyone was caught up on where their level payments should be.
The August increases were adjustments under the new program. Every month, KCP&L will calculate customers’ average electricity use over the last 12 months. If the average use jumped — or declined — by at least 10 percent, the customer’s bill will change.
July “was actually significantly hotter than normal,” said Chuck Caisley, a spokesman for KCP&L, explaining the August bill changes.
Consumers had balked at the new plan last month even before the latest increases. Some said the new system wasn’t budget billing at all and came at the worst time of the year — summer. One group even created an online petition calling for an audit of KCP&L.
KCP&L says it had wanted to go to this plan for years, but the company’s billing system couldn’t handle it until this spring.
Under the previous plan, customers would pay the same amount for 12 months based on the previous 12 months’ use. But they sometimes would use substantially more power than the level payments had covered. KCP&L would then increase their payment level to collect for the added power already provided without charge.
“It’s essentially an interest-free loan from KCP&L,” Caisley said.
The new program allows Budget Billing payments to change during the year to catch a large increase, or decrease, in power usage closer to when it happens.
It’s quite a change for a group of budget-conscious consumers who’ve gotten used to paying the same electric bill throughout the summer. For many, that steady payment helps them stretch limited incomes across already tight budgets.
The recent increases hit Richard and Heather Garza right after they moved to a different house in Kansas City. They’d been on the level payment plan at their old house, paying $157 a month.
A new home brought a new level bill, $185 a month, which made sense because it was about the same size as the old house.
Then, a new month brought a new level payment — $344. Richard Garza said calls to customer service led to contradicting answers and little help.
“There’s no way to budget the way they’re doing it,” Heather Garza said.
Lowered bills possible
The widespread budget billing increases in August’s cycle were not what KCP&L says it expects to happen most months.
KCP&L’s new plan allows changes to level payments but should leave 80 percent to 90 percent of customers’ bills unchanged each month, Caisley said.
And that is what has been happening as bills began reaching customers in September.
Caisley said, so far, 80 percent of those bills remained unchanged from August. The 20 percent that did change were split nearly evenly between higher and lower monthly payments.
It’s closer to what normal will look like under the new program, Caisley said.
In August, 6 percent of budget customers actually saw decreased payments.
September’s weather, which affects bills received late in the month and into October, started out hotter than usual but has turned cooler. A stretch of normal weather should help lower budget bills, though it may take two or three months.
Normal weather might, for example, reduce average usage by 3 percent the first month, 4 percent the second month and 3 percent the third month.
At that point, the customer’s average usage would have declined by 10 percent from where it stood when KCP&L last set the Budget Billing payment, and the customer’s payment would reset to a lower amount.
Caisley said all Missouri customers can expect relief from current electricity rate proceedings that will lower rates. He said the amount of decline is not yet determined. Lower rates help because the Budget Billing payments are based on the dollar value of the power used over 12 months.
A rolling average
Though customers had become accustomed to the old system, Caisley said there were problems with it.
KCP&L essentially added up the previous 12 months’ bills and divided by 12 to set the payment for the next 12 months. Budget Billing meant the customer paid that much every month regardless of how much power they actually used and independent of any rate changes during the year.
At the end of 12 months, KCP&L would do the math again.
If the customer had used more power than the payments covered, KCP&L would increase the payment for the next 12 months to collect that unpaid amount. The customer’s new payment also may have increased because of his higher average use over the previous 12 months.
Caisley said such increases could be large and become “incredibly frustrating” for some customers.
The new billing system, with approval from state regulators, allows KCP&L to do the math every month — using the past 12 months’ average — rather than once a year.
It may mean increases or decreases from time to time, but KCP&L says each step should be relatively small compared with the one-year resets under the old plan. It’s called a rolling average.
KCP&L said it will change a customers’ monthly rate only when the new rolling average bill is at least 10 percent greater or lower than the old rolling average.