KEEPING AN EYE ON COSTS

By Terry Moseley, Executive VP/General Manager

Operating an electric utility is much like owning a car. Expenses related to car ownership include fixed costs (loans, insurance and taxes) and variable costs (gas, oil, tires and other maintenance). Your fixed costs remain relatively stable throughout the life of the vehicle, but your variable costs are determined by how you operate it – how many miles you drive and the cost of fuel and other materials you purchase.

Similarly, electric utilities are subject to fixed and variable costs. Fixed costs include loans for expenses such as power lines, trucks and equipment. Variable costs depend on the amount of electricity purchased and the cost of generating it. The variable costs associated with our operations have escalated over the past several years, especially the price of natural gas used to generate electricity.

Purchased power cost makes up 50% of our budget, and we have little control over that expense. Last year, the cost of power we purchased from PowerSouth was $1.2 million more than what we had budgeted. Like Pioneer Electric, PowerSouth is a cooperative that serves its members at cost. Thankfully, PowerSouth was able to cushion the impact of even higher power costs through proactive measures.

Another factor we’re battling is the cost of materials and supplies to maintain our system, which has increased an average of 40-45% across the board – 100% in some cases. Our total expenses have increased twice as much as our income since 2019, leaving us with a deficit in our 2023 budget.

For these reasons, it’s necessary to change our pricing structure. Our board is evaluating rate options that will cover our cost of doing business while having the least impact on our members’ power bills. We strive to give as much notice as possible when a rate increase is imminent, and our members should expect these changes to take effect in the first quarter of 2023.

On average, Pioneer Electric’s rates are competitive with our peers. Other utilities, including investor-owned utilities, have also implemented rate changes for the same reasons.

Maintaining dependable service at an affordable cost remains the cornerstone of our business, and we appreciate the opportunity to serve you. 