What Are Rider Charges on Your Electric Bill?

Getting an electric bill with various rider charges can be confusing. Rider charges are additional fees that electric utilities tack onto your bill for specific purposes. Understanding what these rider charges are for can help you better interpret your electric bill and how it’s calculated.

What Are Riders?

A rider is an extra charge that is added to your base electric rate. The base rate covers the basic costs of generating and delivering electricity to your home. Riders represent additional costs the utility incurs that are passed onto customers.

Common types of riders added to electric bills include:

• Fuel cost adjustment riders
• Environmental riders
• Renewable energy riders
• Energy efficiency riders
• Franchise fees
• Nuclear decommissioning riders
• Hurricane recovery riders
• Capacity riders

These riders can vary significantly between electric utilities and service territories. The types and amounts of riders on your electric bill will depend on your specific utility company and where you live.

Why Are Riders Added to My Bill?

Electric utilities use riders as a way to recover specific costs related to providing electric service. There are a few reasons why utilities use special riders rather than just incorporating these costs into the base rates:

• Temporary or variable costs – Some riders are used to recover costs that fluctuate, like fuel prices. Adjusting a rider allows the utility to pass through these changing costs without having to recalculate base rates.

• Upfront expense recovery – Big capital projects like new power plants require major upfront investments. Utilities can add special riders to gradually recover these costs over time rather than building them into base rates all at once.

• Transparency – Riders help break out unique costs so customers can better understand what they are paying for. This is especially true for optional programs.

• Flexibility – Utilities can add or update riders more easily compared to undergoing a lengthy rate case to update base rates. This allows them to recover new costs between rate cases.

Common Types of Riders

Some riders are standard across most utilities, while others are more unique. Here are some of the most common riders seen on electric bills and what they represent:

Fuel Cost Adjustment Riders

These riders go up and down based on a utility’s changing fuel expenses. Fuel cost riders typically adjust each month to pass through the latest costs of fuels used to generate electricity, like natural gas, coal, and oil. This rider helps the utility recover fluctuating fuel expenses without having to request a base rate increase.

Environmental Surcharges

Environmental riders account for costs associated with complying with environmental regulations. This may include installing emission control equipment, obtaining emissions allowances, converting plants to cleaner fuels, or retiring older coal plants. These riders help recover the costs of complying with clean air and water rules.

Renewable Energy Riders

In states with renewable portfolio standards, utilities charge riders to recover costs associated with adding more solar, wind, and other renewable generation to their systems. The fees help pay renewable power producers and offset the higher cost of renewables compared to fossil fuels.

Energy Efficiency Riders

These riders fund energy efficiency programs that help customers reduce energy consumption through actions like weatherization, HVAC upgrades, lighting retrofits, smart thermostats, and more. The rider covers the cost of administering these programs.

Franchise Fees

Franchise fees compensate local governments for allowing electric utilities to operate in their jurisdiction by using public right-of-ways. Utilities pass these costs to customers via franchise fee riders.

Nuclear Decommissioning Riders

Utilities with nuclear power plants charge riders to accumulate funds needed to safely decommission and dismantle reactors when they retire. This ensures customers who benefit from the nuclear plants pay for their eventual decommissioning.

Hurricane Recovery Riders

In hurricane-prone states like Florida and Texas, utilities charge special riders to offset costs from restoring power lines and infrastructure damaged by major hurricanes. These help fund repairs between rate cases rather than building storm recovery costs into base rates.

Capacity Riders

In restructured states, utilities often have riders to recover capacity costs – payments power providers receive for having power plants available to meet demand. These riders compensate generators for standing ready to provide electricity when needed.

Should I Expect Rider Charges?

If you receive electric service from an investor-owned utility, you will likely see various riders on your monthly bill. Municipal utilities and electric cooperatives may also utilize select riders for specific costs like power supply and renewables.

The types and amounts of riders can vary drastically depending on your utility company, location, power supply mix, infrastructure projects underway, and state energy policies. But riders are an important factor that impact your total electric charges.

If you suddenly see new riders or significant increases on existing riders, be sure to check with your utility to understand what’s driving the changes. Some rider increases may be unavoidable, like recovering hurricane restoration costs. But understanding what the riders are for can help you better interpret your bill.

Tips for Managing Rider Charges

While base electric rates are set through regulated rate making processes, utilities often have more flexibility with riders that aren’t built into base rates. Here are some tips for managing rider costs:

• Review rider details – Understand what costs each rider on your bill covers so you know what your charges relate to.

• Compare plans – Some utilities offer alternative rate plans with lower riders for eco-conscious customers.

• Leverage opt-out programs – You may be able to opt out of optional programs if you don’t value the service.

• Practice energy efficiency – Using less energy can help minimize the impact of any variable riders that change based on usage.

• Shift usage – Shifting more usage to nights and weekends can take advantage of lower TOD rates to reduce rider costs collected per kWh.

• Appeal to regulators – Get involved in rate cases and riders proposals to share customer concerns with utility commissions.

• Support better policies – Advocating for policies that best align utility incentives around affordability can influence future rider amounts.

Understanding riders is an important part of making sense of your electric bill charges. While you may not be able to avoid riders completely, you may have options to reduce their impact through energy efficiency, rate choices, and advocacy.