What are these other charges on your utility bill?

Learn about riders and their purpose.

When you receive your electric, natural gas, or water bill, you may notice line items or explanations of the various other charges outside the typical service costs. These charges, known as riders, have a variety of names, purposes, and rules. Let’s break down what a rider is and why utilities use them. 

What is a rider? 

A rider is a utility charge, not included in standard rates, that allows a utility to recover the costs of specific programs. The PUCO and utilities are authorized by statute to create and approve riders with limitations based on the industry. For example, Ohio Revised Code 4929.161 allows natural gas companies to create an infrastructure development rider that covers the cost of specific economic development projects. The utility may spend that money under the guidelines of the rider and then collect the program’s fees spread across its customers. 

Riders can have spending limits known as caps. For example, the Commission may approve a vegetation management rider to recover only up to $10 million in costs annually. Should the utility spend more, any price above $10 million will not be charged to customers. Riders can also be credited to consumers when they’re designed to return money or credit an over collection.  

Each rider may have unique limits or cost recovery mechanisms and may be listed as line-item charges or embedded as part of the distribution service charge. The easiest way to see what riders you are being charged for is to look at your bill explanation page, visit your utility’s website or check any regulated company’s tariff here on the PUCO website. 

Why include riders at all? Why aren’t these costs typically included in base rates? 

Base rates are calculated on the costs of a typical year; riders can address specific costs outside the utility’s control. For example, riders can cover the costs of repairing unexpected significant storm damage, which may only occur once every several years. In base rates, those costs would be recovered annually on a long-term basis, whereas with riders, customers would only pay those extraordinary costs when they occur. In that way, riders are not considered additional charges on top of base rates but more specific ones. 

Additionally, base rates are not audited annually and are not subject to reconciliation like riders are. Riders also help insulate consumers from more significant price increases by adjusting costs regularly rather than a larger adjustment after several years at the same rate.  

How are riders monitored? Are they permanently added to my bill? 

Riders are reviewed periodically by PUCO staff, usually on an annual basis. Depending on how a rider is set up, the utility may require quarterly, yearly, or semi-annual filings. The riders may also be required to be adjusted regularly as costs increase or decrease. 

Once approved, a rider cannot be removed without going through the appropriate process. For example, some riders may be initially set up to be approved only for a limited time or purpose; after that, they would be removed or have the rate set to zero.  

Source: PUCO