What is a facility charge on a business customer’s utility bill?
A facility charge, also called a capacity charge, is a monthly charge based on a customer’s highest electric use recorded over the previous twelve-month period. The rate varies depending on the size of their business and the type of service they require. This charge is separate from the customer’s usage/consumption charge. The charge enables LADWP to build or “size up” our grid to be able to meet our customers’ electricity demand when they are operating at peak capacity—to cover expenses of distribution system facilities dedicated to a customer. This charge is not unique to LADWP and is a utility standard.
Why does DWP still charge a facility charge if businesses are closed and not using a lot of electricity?
The facility charge is a separate amount from what is charged for a customer’s usage. As long as a customer has an active electric account with LADWP, the facility charge will be included in each bill, whether that business is open for business or not and whether they are using a large or small amount of electricity. This is because regardless how much electricity a customer uses, the grid has to be built to a size sufficient to meet a customer’s maximum electricity usage at any point in the year. If a customer’s maximum (peak) use decreases or increases over the 12-month period, their capacity charge will be adjusted up or down accordingly in the next 12-month period. This charge is similar to how the Sewer Service Charge on the customer’s utility bill is adjusted to recover costs for LA Sanitation services.
Why is the facility charge based on the peak use and not an average over the previous 12-month period?
LADWP must build its electrical grid to meet the maximum use demanded by customers and is required to allocate costs to customers fairly, according to their use and the related infrastructure costs. If we only billed customers based on their “average use” over 12 months, the costs of grid infrastructure to serve one customer would be subsidized by all other customers. This is illegal.
How can businesses reduce their peak usage and their capacity charge?
Conservation and energy efficiency measures can help reduce peak usage. LADWP also has rates that may help some businesses that can shift their peak usage to times of the day when overall electricity usage is lower on the grid (“off-peak”) periods. LADWP customer service and small business teams can help customers minimize their overall use, helping them save on their consumption charges and potentially lower their peak usage depending on their business operations. To request a pay plan, login to your account and select a plan that woks for your, or call 1-800-DIAL- DWP. For information on small business assistance, call 1.800.864.4409.
Would LADWP consider waiving the facility charge given the tough circumstances of small businesses during the pandemic?
We are legally prohibited from doing so. We are a public utility, and because of that, what one customer doesn’t pay, other customers will have to pay to make up the difference and by law we are required to charge customers according to the cost of providing them service. Like all other utilities, we set our rates so our customers are charged their fair share for the service we are providing.
Do businesses have any other options to help with their utility bill?
We understand these are very challenging times for many of our customers and have made available new extended payment plans available to spread these charges out over many months. They were recently updated to help meet the needs of those who are facing financial hardships in the face of the COVID-19 pandemic. LADWP’s new expanded payment plan options significantly reduces the amount of the required initial payment to enter into a payment plan and doubles the length of time customers have to pay off their balance. We also do not report late payments to credit bureaus and will not shut off customers for non-payment during the pandemic.
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