Rate increase planned for late summer

As I write this (midMarch), it looks like our rate increase later this summer will be less than 10% total, or around $2 4 million in additional revenue. This is a preliminary estimate. (This would be similar to our last rate increase. That one, 13 years ago in 2010, was an 8% increase for an additional $2 million in revenue.)

Each rate class (residential, seasonal, small commercial, large commercial, etc.) will see an increase. But they will be of varying degrees. Some may see higher increases than the total average, and others will see lower increases. The reason for this was explained in my column last month, when I talked about cost of service studies. We use detailed engineering and financial data to determine what it costs the cooperative to make service available for each rate group. Each rate group has different service characteristics that affect our cost to provide service. Our goal is to design rates that are close to what it actually costs us to make service available. This helps reduce the subsidies between rate groups.

Why $2.4 million?

Members may wonder how we came up with a preliminary estimate of $2.4 million for a rate increase. In simple terms, we’re running low on money. We do detailed financial forecasts annually, and our forecasting shows us running short in the near future. We haven’t had a rate increase in 13 years, and expenses and inflation have caught up with our No. 1 goal of providing reliable electricity. If we want to continue to provide reliable electricity, we have to continue to invest in our electric system. We spend $3 million to $4 million every year on electric system maintenance and improvements, not including labor, taxes, interest and other growing expenses. If we don’t do the rate increase, we would need to stop electric reliability maintenance and upgrades, which means your power would go out more often, and for longer periods.

Our seven-county electric system is valued at more than $60 million. It comes out to $39,528 per mile of line, or $5,970 per residential consumer. And we must continually add to that, every year, in order to maintain power reliability. We’re also facing declining margins, which means declining member equity. This impacts our ability to invest properly in electric system reliability. It also means we have to borrow more money from lenders, which increases our interest expense. More loan borrowing also means member equity declines. If member equity would continue to decline, it reduces our financial flexibility, which could be particularly harmful during an emergency such as an extreme storm when we need large amounts of cash, fast.

Continued

But we know you’re running low on money, too. That’s why we’ve worked hard to delay any necessary rate increase while most other utilities have had big increases. We’re unique, being able to say it’s been 13 years since our last increase, which means our upcoming increase averages out to less than 1% per year. Some might respond to that by saying, why not just do small 1% increases every year instead of a larger increase every 10 years or so? In hindsight, maybe. There is a valid argument for that approach. But how would we have known if the 1% would be too little, or too much? Our preference, rather, is to not seek the increase until we need it.

Please take advantage of our savings and energy e ciency programs, outlined in the following pages. We have rebates to help you buy more energy-e cient appliances, water heaters, heat pumps, and geothermal systems. We have billing discounts if you use our autopay or paperless options. We provide free energy audits. Our online program, called SmartHub, has your monthly, daily, and hourly electric use data and you can even get high use alerts. Our online energy calculators help you identify what in your home uses the most power.