How a Large Industrial Customer Makes Everyone’s Electricity Bill Cheaper
Utility economics work differently than most consumers realize. A power utility â whether a private investor-owned utility or a public entity like the Imperial Irrigation District â has substantial fixed costs: transmission lines, substations, generation capacity, billing infrastructure, regulatory compliance, and the administrative apparatus required to operate a reliable electric grid. These fixed costs exist regardless of how many kilowatt-hours flow through the system in a given month. They are paid by spreading them across the total kilowatt-hour consumption of all customers.
When a very large customer joins the system and begins consuming substantial quantities of power, those fixed costs are spread across a larger total consumption base. The per-unit cost of recovering the fixed infrastructure goes down for every customer on the system. This is not a theoretical benefit â it is the fundamental financial logic that makes large industrial customers attractive to utilities, and the reason that utility economic development departments actively recruit large industrial users.
IID’s Situation
IID serves approximately 160,000 customers across Imperial County and a portion of Riverside County. Its customer base is predominantly residential and agricultural â not the high-consumption industrial mix that keeps fixed cost per kilowatt-hour low. The geothermal generation resources IID accesses through power purchase agreements produce power at favorable prices, but the value of that low-cost generation is amplified when there is sufficient demand to consume it at the generation cost rather than selling excess into the broader wholesale market.
The IVDC’s 330-megawatt load is not a marginal addition to IID’s system. It is a transformative one. A single customer consuming at that scale â roughly equivalent to one-third of IID’s current total system demand â changes the utility’s cost structure in ways that benefit every existing ratepayer. The fixed costs of the transmission infrastructure, the substations, and the administrative system are recovered across a dramatically larger consumption base.
The Rate Impact Argument the Opposition Avoids
The coalition opposing the IVDC includes organizations that position themselves as advocates for working-class and low-income residents of Imperial Valley. These organizations have not addressed the rate impact analysis. They have not explained to the families paying IID electric bills every month â some of the lowest-income households in California â why blocking a development that would reduce their per-unit electricity costs serves their interests. They have focused on the alleged environmental risks of the project while ignoring the concrete economic benefit that the project’s electricity consumption would deliver to every IID customer.
The IID board, which represents the ratepayers whose bills would decrease, has not actively opposed the IVDC. The county, which represents the tax base that would benefit from the project’s assessed value, approved it. The opposition is concentrated in a city government whose boundaries do not include the project site and in organizations whose funding does not come from Imperial Valley ratepayer utility bills.
The people who pay IID bills have a financial interest in the IVDC being built. The people blocking it are not paying those bills.
Original Article: https://www.ourimperialvalley.com/large-industrial-customer-makes-electricity-bill-cheaper/
