6 minute read
POWERING UP
How Fuel Prices Impact Your Electric Bill
By JoMarie Ramsey
Winter Storm Uri was a catastrophic weather event that swept through the United States in February 2021, leaving a trail of destruction in its wake. One of the sectors hit the hardest by this storm was the utility industry. The unprecedented freezing temperatures and heavy snowfalls caused widespread power outages and equipment failures, severely affecting millions across the country.
Since the effects of the Uri, questions on the minds of many are the factors that determine the price they pay for electricity and what measures are being taken to ensure affordable and reliable access to power.
Oklahoma Electric Cooperative’s ultimate goal as a not-for-profit is to protect our members. Several factors show up on your bill.
“All rates are made up of fixed and variable costs,” said Key Accounts Specialist and rate expert Tim Ferree.
The fixed cost contains things like administration, poles, wires and trucks. This appears as the service availability charge on your bill, Ferree said. Demand and energy charges are other factors that make up our fixed cost.
Energy charges are based only on the total amount of energy consumed. Demand charges on non-residential accounts are based on the highest level of electricity you demand at one time during the billing period and at the time of day it is needed.
OEC builds an estimated fuel cost into our rates, which is considered our base rate, Ferree said. 8231336001
“Those are the things you can control,” Ferree said. “Variable costs include the fuel cost adjustment, which is a separate line item on each bill that reflects the increases and decreases of the power we purchase from Western Farmers Electric Cooperative (WFEC).”
As a distribution cooperative, OEC purchases power at wholesale cost and delivers it safely to members’ homes and businesses. Generation cooperatives like WFEC rely on various inputs to generate power, including natural gas, coal, oil and renewable resources like wind and solar, Ferree said.
“The fuel cost adjustment must either recover any excess or credit anything lower than the base rate,” Ferree said. “If it is higher than our base rate, we have to make that charge to the member, but if it is lower than our base rate, we credit it to the members.”
When OEC buys power from WFEC, we buy a fuel mix. The prices of these inputs, along with other factors like regulatory policies and infrastructure investments, can significantly impact the cost of producing electricity, Ferree said.
Natural gas is one of the most important inputs for electric utilities, used to power gas-fired power plants. Supply and demand factors, such as production levels, weather patterns and global energy markets, determine the price of natural gas. When natural gas prices are low, generation cooperatives can generate electricity at a lower cost, translating into lower electricity prices for consumers. Conversely, when natural gas prices are high, electric utilities must pay more to generate electricity, which can result in higher electricity prices.
“Despite these hardships, WFEC is a leader in the integration of renewable energy that benefits all OEC members,” said Ferree. “WFEC has maintained a reliable supply of wholesale electric service across their region at a very competitive price.”
In 2021, Uri disrupted natural gas production, causing shortages and driving up prices nationwide.
“Supply disruptions like Uri have a ripple effect on electricity prices,” Ferree said. “Once most production was frozen or disrupted, then there isn’t natural gas on hand, then all of a sudden, there is a huge spike in natural gas demand because people need it for heating their homes. So, with limited on-hand fuel and high power demand, the price kept increasing.”
As an electric cooperative, one distinguishing factor that sets us apart is our ability to control our rates, giving us the flexibility to respond efficiently to disruptions like high fuel prices.
“We knew with those astronomical gas prices, we would have to find a balance in our cost adjustment between covering costs and being as fair as possible to the members,” Ferree said.
In an effort to take a proactive approach, we set the cost adjustment at a reasonable level and gradually building up our balance to prepare for any future rate changes, Ferree said.
One of the benefits of having control over our cost adjustment is that we can quickly respond to changes in the market and lower rates as soon as purchasing costs decrease. This sets us apart from other utilities that may have a different level of flexibility and allows us to pass savings on to our members as soon as possible. By monitoring market trends and staying vigilant in our efforts to maintain affordable and reliable electricity, we strive to provide the best possible service to our members.
Two years later, OEC’s cost adjustment has decreased significantly, from an almost historic high to a more normalized rate. Our prices remain below the national average price of electricity, and we continually work with WFEC to ensure that remains the case.
The impact of fuel prices on electricity rates is a complex issue that requires careful consideration and planning by electric utilities. As a not-for-profit electric cooperative, OEC remains committed to finding innovative solutions that prioritize the needs of our members and ensure their continued access to the power they need to live and work.
WHAT CAN I DO IN THE MEANTIME?
We provide various solutions for those seeking relief from these temporary price increases.
• Apply for a FREE energy audit through our Home Energy Consultation Program to identify ways your home can cut energy use — and costs. Learn more at okcoop.org/HECP
• Enroll in hourly or daily high-usage text message alerts via the MyOEC mobile app. If your electricity use exceeds your threshold, you will receive a text message and can take immediate action to avoid a high bill.
• Consider switching to a different rate. We offer three residential rates, each one ideal for different usage types and behaviors. Learn more and switch rates at okcoop.org/rates
• Create your home’s profile using our online Home Energy Advisor tool. It helps pinpoint ways you can start saving on your energy costs right away. Use the free tool at okcoop.org/auditcalc
• Use the MyOEC mobile app to make payment extensions. Contact us at okcoop.org/contact if you have additional questions regarding the Cost Adjustment or solutions.
