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Why Tiered Rates

In Idaho Power rate case (IPC-E-08-10, Order No. 30722), the Commission approved a tiered-rate structure, which assesses customers higher rates as consumption increases.

Some customers, especially those residing in all-electric homes, question the fairness of the new rate structure. Some are confused as to how tiered-rates work. There are two very important items to understand about tiered rates:

1) You don't pay the higher rate on all your use. You pay one rate for use up to 800 kWh per month, a slightly higher rate for use from 801 kWh up to 2000 kWh, and the highest rate for use above 2000 kWh. For example, if your total monthly consumption is 2050 kWh, only the last 50 kWh is priced at the highest rate. Your first 800 kWh will be billed at the lowest rate. Then, your next 1200 kWh will be billed at the second-tier rate. Only your use of more than 2000 kWh is billed at the highest tier.

2) While it's true you will pay more the more you consume, we believe that all customers will save in the long-run. The reduced use of electricity that will happen throughout Idaho Power's territory will eventually mean lower costs for all customers in the future. When Idaho Power cannot produce enough electricity to serve customers with its lower-cost hydro and coal plants, it must either start up its more expensive gas-fired turbines or buy electricity on the market. This results in higher rates for all customers. Further, less consumption will delay the need for Idaho Power to build costly new generating facilities. That also saves all customers considerable expense.

Tiered rates seek to lower overall energy use, thereby delaying the need for highly capital-intensive projects to increase baseload facilities.