Many Americans look at their monthly utility bills and blame the high costs on the extreme heat outside.

However, that’s just part of the situation. Consumers are also inadvertently covering various expenses, including fees for utility companies’ trade associations, lobbying campaigns to raise rates, and even potentially memberships at country clubs, according to consumer advocates. In severe cases, allegations suggest that these bills may also cover bribes to politicians.

These additional costs may amount to just a few dollars each month, which might seem minimal on a $150 bill, but over time, the total can become significant. This is particularly troubling as the amount owed by people struggling with their utility bills has grown by 8.4%, reaching $17.4 billion since December 2023, according to the National Energy Assistance Directors Association (NAEDA). They also forecast that utility shut-offs may rise by 300,000 households to 3.5 million by year’s end.

Utilities usually monopolize the service in the areas they operate, leaving consumers with limited options, experts have remarked.

“If each customer pays just a few extra dollars every month, this totals hundreds of thousands of dollars over time,” noted David Pomerantz, the executive director of the Energy and Policy Institute (EPI), a watchdog group.

What are utilities charging for?

Documents show that utility companies often include fees for trade associations, external professional services, and membership dues for social clubs in their expenses.

For instance, when Peoples Gas asked regulators to approve a rate hike last year, they included costs like memberships to organizations such as the Mid-America Club, described as “Chicago’s leading venue for building diverse relationships,” and Olympia Fields Country Club, which provides access to networking and business relationship opportunities.

Utilities argue that dues to professional groups like chambers of commerce and industry associations offer research and benefits that ultimately help customers.

Critics contend, however, that several trade organizations and professional groups advocate for increased rates or resist measures that could threaten their business, such as rooftop solar energy, energy-saving initiatives, and the electrification of buildings, according to Pomerantz.

Utilities have also directed funds to 501(c)(4) non-profit organizations, often referred to as “social welfare” groups, which can accept limitless corporate and personal contributions and frequently engage in lobbying or political advocacy.

A notable case involved FirstEnergy’s bribery scandal, which came to light in 2020, indicating that the company influenced then-indicted former Ohio House speaker Larry Householder. In this instance, FirstEnergy and its subsidiaries funneled millions into 501(c)(4) organizations that contributed $60 million to political action committees.

“As a result, the utility received a $1 billion bailout funded by ratepayers for several of its struggling coal and nuclear facilities and secured another profitable deal to guarantee its Ohio utilities’ profits at the expense of consumers,” Pomerantz detailed in a report.

Utilities’ response

It’s primarily state regulators who approve the rate changes proposed by utility companies, which don’t always get the green light.

For example, Peoples Gas requested $5.2 million for certain expenses in its recent rate hike appeal, but regulators reduced that amount by $172,000.

According to Peoples Gas, expenses for executive and country club memberships cannot be billed to customers; they are instead footed by shareholders.

Nevertheless, some experts are skeptical of this claim.

“That’s fair if it’s accurate,” remarked Matt Kasper, research director at EPI. “But it’s reasonable to question the utility’s logic about why they would list these clubs, such as Olympia Fields Country Club and The Chicago Club, in their costs for proposed rates. Where exactly is the money going?”

FirstEnergy, amid its bribery scandal, stated it has enacted reforms.

In a recent email, FirstEnergy communicated: “Under new leadership and a revamped Board of Directors, we have made substantial progress to enhance our ethical culture, integrity, and accountability. This includes developing a robust compliance program and advancing critical policies and transparency for all stakeholders.”

State regulatory actions

Currently, eleven states are working on legislation to hold utilities accountable, preventing them from passing political-related expenses onto consumers.

The costs to consumers encompass various states including Arizona, California, Illinois, Maryland, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, Utah, and Virginia.

Last year, Colorado, Connecticut, and Maine adopted similar legislation.

Critics contend that further actions are necessary. While states do manage rates, each state relies on the financial form provided by the Federal Energy Regulatory Commission (FERC).

“FERC has functioned using a standard accounting and reporting system that permits utilities to choose which costs are recovered from ratepayers along with other expenses,” explained Tyson Slocum, the energy program director at the progressive nonprofit organization Public Citizen. “This system allows utilities to make the first decision regarding what can be recovered and what cannot.

“We suggest implementing the opposite approach,” he added. “Begin with the premise that no financial contributions to trade associations or similar initiatives should be recoverable by the utility company unless specifically requested. Change the default setting.”

Last year, Representative Kathy Castor (D-Fla.) put forth a bill instructing FERC to stop utilities from charging for political costs, which includes any advertising, marketing, or public relations activities that could influence elections, appointments of public officials, sway opinions on specific bills, or affect rate setting, among other factors.

The legislation would also prevent utilities from recovering expenses associated with dues or fees paid to trade or industry associations and certain types of nonprofits. Utilities that do not comply or breach the law would face penalties.

“Most people think they’re just paying for electricity, its delivery, power plants, and transmission lines,” said Pomerantz. “They don’t realize their bills also cover lobbying, advertising, and other related expenses.”