CO-OP NEWS
the future of electric rates BY BRIANNA WALL
6
Oklahoma Electric Co-op News • April 2018
The last 80-plus years of electric rates have conditioned us to believe the cost of electricity is around 11¢ per kilowatt hour (kWh) — a national average. Realistically, the electricity itself is the cheapest part of our electric bills; only about 3.5¢ per kWh. If that’s the case, why have we been paying 11¢ per kWh all these years? It’s quite an enigma, the way we as consumers have been billed for electricity since the first electric bill went out almost a century ago. We believe most of our electric bill hinges on how much electricity we consume in a given month. What if we told you the amount of electricity you use isn't the biggest factor on your bill? That only 20 to 30 percent — or less — of your bill is dependent upon your electricity use? It’s true, and consumers across the nation are waking up to this new idea. It’s a revolutionary way to think of your electric consumption and how you pay for it, but, if your bill is only 20 to 30 percent electricity use, where does the rest come from? T H E SIG N IF ICA N C E O F F IX E D CO ST S The American electric grid is a fascinating engineering marvel, one that took years to perfect and continual efforts to operate. From generation facilities and transmission infrastructure to distribution lines and meters, it took a hefty chunk of change to construct this intricate system and requires a continuous cash flow to maintain it. The good part is these costs rarely change and are rather simple to budget year after year. They are fixed costs. And they’re the backbone of all electric companies. If you have read CEO Patrick Grace’s monthly column From the Top in the last year, you have an idea what makes up the majority of an electric utility’s costs: the infrastructure in place and its maintenance. In other words, fixed costs; not only OEC’s fixed costs, but those of our generation and transmission provider, Western Farmers Electric Cooperative (WFEC). Members pay for fixed costs through the service availability charge (SAC) and the energy charge on their bills. The SAC currently sits at 83¢ per day, or $24.90 for a 30-day bill. Let’s take a closer look at the actual fixed costs OEC is required to pay.
