There is no such thing as a ratepayer.

To folks in the energy business (particularly those involved in regulated electricity or natural gas utilities), this is an absurd statement. “Of course there are ratepayers. They are the people who buy electricity or gas from us, paying the rates that state and federal regulators have approved,” they might say.

But if you are in the small circle of folks who carefully watch the words and actions of the Federal Energy Regulatory Commission, the shift in vocabulary away from “ratepayer” and toward “customer” is not a surprise. That change in language is more important than you might think -- and has largely happened during the time that Cheryl LaFleur has served as the acting FERC chairman. (Yes, she does prefer and use the title “Chairman.")

The terminology used by an energy regulatory agency might seem like a very trivial thing, but it is actually of great significance. The decisions and determinations of FERC shape our energy system and the society that that system powers. The primary tools that FERC employs are the words in its decisions and orders.

The journey away from “ratepayer” starts when thinking about the utility as a provider of energy efficiency, demand response and other demand-side management techniques. When the utility is partly in the business of reducing usage -- and often pays for those programs with a small charge on customer bills -- it brings attention to the fact that customers truly care about the size of their bill, not the rate that is multiplied by their usage to calculate the bill.

As Rocky Mountain Institute's Amory Lovins used to ask: “Have you ever paid a rate? Do you know anyone who has ever paid a rate?”

Following in the footsteps of her former boss at the New England Electric System, John Rowe, Chairman LaFleur has a closely related rationale for rejecting “ratepayer” and adopting “customer” as the term of choice.

She noted that she “basically had it drilled into me by John Rowe not to use the word ‘ratepayer.' It sounds rather passive, like someone on whom rates are imposed, whose role is defined by paying for something -- not buying something. I was taught to treat customers as if they have a choice, even before they did.”

It is deeply true that thinking of customers (whether they are individuals, businesses or non-profit institutions) as abstract “billpayers,” “ratepayers,” “load” or “end users” is a mistake that reveals the fundamental misconception that the job of the utility is to supply a commodity.

People don’t pay the electric bill because they lie awake at night hoping for kilowatts. They just want the refrigerator, the toaster, the television and the cell-phone charger to work. Similarly, a factory owner just wants her machines and lights to turn on when she flips the switch. The job of the utility is to provide an energy service, reliably and at a reasonable price. Whether that energy comes from a distant power plant, a solar panel on their roof, or a Tesla battery hanging on the wall is usually a matter of secondary importance to the customer.

This idea of the utility as a service provider is increasingly important as our system evolves into a complex web of distributed (and increasingly low- and zero-carbon) resources connected through advanced data communications systems. Customers are no longer just "ratepayers" -- they are people and organizations with many choices, some of which may compete with utility generation.

Reshaping our energy systems to accommodate more energy efficiency and distributed energy will require getting the policy and regulation of those systems right. It will also include changing our language to reflect the changing role of the consumer.

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Seth Kaplan is the vice president for policy and climate advocacy at the Conservation Law Foundation, a New England-based environmental advocacy group. This piece was originally published at the CLF blog and was reprinted with permission. 

Tags: ratepayer, utility business models