Recently, Santee Cooper proposed a brand-new electricity rate structure for residential customers in Myrtle Beach, SC which is to go into effect in April 2025. The proposed-rate structure includes a new mandatory “demand” charge, which the Utility argues will incentivize residents to reduce their electric load between the hours of 3pm-6pm in the Summer and 6am-9am in the Winter.
Their publicized literature states that a resident will on average only pay 8.7% more in 2025. As an energy consultant for two decades, I have opposed their proposed rate increases.
Santee Cooper
First, the published impact from the Santee Cooper rate-increase of 8.7% far underestimates the true projected annual rate increase for the average residential customer. A closer look at their data, shows that the distribution of rates is negatively skewed. This means the actual projected annualized rate increase for residential customers is expected to be between 14.45%-21.56% (i.e. about 20%).
The 8.7% number that Santee Cooper released, does not appear to convert the increase impact to an “annualized number” and instead only reflects the months March 2025 – December 2025. This may be misleading. Residents should know that in reality, they could foresee energy bills, with increases closer to 20%. This is significant.
Second, the current Santee Cooper proposed rate increase may not be in line with statutory goals of S.C. Code Ann. §. The local economy is still recovering from the shock-waves of Covid and other labor and supply shortages. Residents and businesses have already been hit hard with a rising cost of doing business and making a living.
As we enter an election cycle, a number one priority on many voters minds is the economy and inflation. With a foreseeable 20% jump in their 2025 energy bills, local residents and small businesses should be concerned about a sudden inflationary spike, which may ripple through the local economy.
Source: Appendix A, Santee Cooper Rate Increase 2024.
Source: https://data.bls.gov/pdq/SurveyOutputServlet
This energy cost inflation could also cause a ripple effect to the local economy, as families would have less personal income and spending power, and less money to spend in local businesses. This in turn would slow down the local economy. It would also harm a large portion of the residents who are retirees many of whom live on fixed incomes.
This will also make the region uncompetitive on a national playing field. The Federal Reserve has also signaled a desire to reduce inflation to 2%. The existing Santee Cooper proposal would do the opposite – and instead would exacerbate regional inflation and create an energy spike of 20% to residents and small businesses. This could not just harm this region locally from competing on a national level, but also lead to declined residential growth.
Myrtle Beach has experienced record population growth in the last four years and has relied on favorable economic environments (such as in rates, water, and housing) to attract both investment and migration to the state. Adding a 20% energy-inflationary impact to 2025 could undermine the local economy, and simply put – hurt small businesses, as well as families and residents in the community. More thought should also be given to the impacts of adverse inflation, and a potential shrinking of the local-GDP. This 20% rate-spike increase also runs the real risk of slowing down the Myrtle Beach economy and harming its economic viability and competitiveness.
Third, the proposal appears contrary to other national standards as in the majority of the states across the nation, and Public Utilities Commissions have routinely rejected mandatory demand-charges for its residential customers instead making them optional (e.g. Georgia Power).,, Widely conducted research, including from the Regulatory Assistance Project has also shown that Demand Charges do not help the local economy and thus have not been forced upon the residential class.
Source: https://www.fool.com/the-ascent/research/financial-priorities-2024-election/
Source: https://www.reuters.com/markets/us/feds-williams-inflation-target-critical-achieving-stable-prices-2024-05-04/ Source: https://www.southcarolinapublicradio.org/sc-news/2023-08-22/myrtle-beach-named-nations-fastest-growing-city-again Source: Smart Energy Consumer Collaborative: Rate Design: What Do Consumers Want and Need Source: Acadia Center Charge Without a Cause Source: Synapse Energy Caught in a Fix
Therefore, one solution is to make the demand-charges optional in alignment with other states. Families, residents and local small businesses work hard enough, and have already suffered through high inflation since Covid. Residents should be allowed to opt-out of these “demand-charges” and instead pay a modest inflationary increase, on their regular utility bills. This is also more in line with the principle of gradualism.
While the Board has yet to vote on the rates, fair consideration should be given to alternatives to the proposals – for example (a) remove the mandatory demand-charges for residential customers; (b) allow residential customers the ability to “opt-out” and revert to their original billing with a modest inflationary increase; (c) use a more gradual basis of implementing demand-pricing rate structure changes, such as a $1.50 demand charge (not $10) and keep the original base rate the same; (d) adopt a Winter Demand or Summer Demand that coincide only with extreme weather conditions, to actually impact peak load.
Let’s not hurt the local GDP and economy – and let’s help local businesses and residents in this region thrive. A full copy of the report opposing the rates can be found here.
Samantha S. Kumaran
Samantha S. Kumaran. resides in Carolina Forest, S.C.
President and CEO
Timetrics Risk
Leadership Council of the National Small Business Association
