Service Charge Explanation

Recently, we’ve heard concerns about the service charges that are part of every customer’s monthly MLGW bill. We understand why customers might have questions about this policy, and we think it’s important for everyone to understand what they’re paying for.

If a customer is connected to a service, they benefit from having that service available to them, even if they choose not to use it in a particular month. This availability relies on a complex infrastructure that requires constant upkeep. The service charge paid by each customer helps finance that infrastructure, meaning you can turn on a faucet or flip a light switch at any time. That’s why some people refer to the service charge as a “convenience fee” or an “availability fee.” It ensures the utility is available to you on demand.

Without the service charge, a customer who doesn’t use electricity, gas or water — but still has them instantly available — would not be contributing to the costs of making sure those services are always there when they’re needed.

A separate component of the bill is for the actual consumption taken. It is measured in kilowatt-hours (kWh) for electricity and hundreds of cubic feet (CCF) for gas and water. If you are connected to a utility service but don’t use it in a particular month, you are not charged for any consumption (the usage rate) on that month’s bill. However, you are charged a fee to make sure that service is available whenever you want it. This is the service charge, and it’s standard practice at utility companies nationwide. Service charges have been in existence at MLGW since 1940.

Your usage rate covers the actual cost of providing the services you used in your home or business that month. MLGW purchases electricity and gas from providers like TVA. We pump water from the Memphis Sands Aquifer and treat it. Then we sell each to our customers across Shelby County. MLGW has had the lowest combined typical winter residential bill among 50 cities across the country for five years in a row. We only raise our usage rates when necessary to cover costs of operation (and sometimes when required to meet minimums set by federal or state law).

Service charges are reviewed on an annual basis, and sometimes they change as costs change. Currently, the service charges for residential customers are $11.60 for electricity, $10 for gas and $7.76 for water. Because it’s not based on consumption, it’s the same each month.

Curious about what costs that charge covers? As of Dec. 31, 2016, our infrastructure includes

·        4,378 miles of overhead electric distribution lines

·        2,740 miles of underground electric cables

·        4,488 miles of gas mains

·        3,881 miles of water mains

Those are just the paths for services to reach homes and businesses. In order for electricity, gas and water to travel along those paths, our systems rely on hundreds of thousands of other elements. From transformers to water pumps to gas valves, each piece of the vast puzzle must be in place before customers even have the option to turn on the TV or light a stove. And every piece has to be maintained (and sometimes repaired or replaced) in order to ensure we can meet the demand on any given day.

We also constantly upgrade our system to better serve you. Intelligent components in some areas have greatly reduced the time it takes to restore electric service to those customers during an outage. New substations under construction will reduce the load on sections of our system, increasing reliability and our capacity to meet demand. We’re nearing completion of a 30-year project to replace cast iron gas pipes with flexible and durable polyethylene, making our gas delivery system much safer and more reliable and making us more prepared in case of an earthquake. These improvements would not be possible without everyone who benefits from them contributing.

We understand that for most of our community — including MLGW employees — every dollar counts, and each bill has to be carefully budgeted for. Even though MLGW has some of the lowest rates in the country, we offer a number of assistance programs, including payment arrangements and Budget Billing. We encourage anyone who has questions or concerns about their bill to contact our Customer Care Center at 544-6549. Visit mlgw.com for information about rates, assistance programs and more.