HREC Rate Adjustment Proposal
The Board of Directors of Heartland Rural Electric Cooperative will consider a rate adjustment proposal at a special board meeting to be held July 27, 2009. The meeting will begin at 11:00 a.m. at the cooperative’s office in Girard at 110 North Enterprise Drive. This meeting is open to the membership.
The Board of Directors has the responsibility and authority to approve rates of the cooperative. Any action taken by the Board to approve a change in rates must be done at a special meeting open to attendance by the members. Members in attendance may ask questions and voice concerns at this meeting. After this opportunity for the members, the Board will consider approval of the rate adjustment.
Several factors influenced the decision by the Board to conduct a study to examine the electric rates and the cost of providing electric service. A change in wholesale pricing was made by the cooperative’s power supplier increasing the cost of wholesale power and how it is charged for. The Board also desired to incorporate the amount of the Energy Cost Adjustment into the energy charge. And the Board saw a need to address concerns regarding the effects of net metering, efficiency, conservation and distributed generation on the financial condition of the cooperative.
The study indicates that revenue should increase 1.03% or $200,515 and that a change in the structure of rates should be made. The Cost of Service Study and Rate Analysis will be presented at the open meeting and the Board of Directors will consider a decision to approve the rates at that meeting. If approved, the rates will go into effect for August usage and members will see the results on the electric bill they receive in September. Members may attend this meeting to ask questions and voice their concerns.
Summary of Rate Adjustment
Revenue Increase – The rate adjustment includes a revenue increase of approximately $200,500 or 1.03%. This increase will offset some of the increases in expenses the cooperative has experienced since the last revenue increase in 2002. The increase mainly affects the General Service, Seasonal and Metered Security Light classes. There are more than 8000 meters in these classes so the effect in minimal. The Board of Directors is pleased that the only revenue increase needed in the past 9 years equals a little more than 1%.
Energy Cost Adjustment – The ECA is being rolled into the energy rate. The average ECA in our rate analysis is $0.013717 per kWh. This amount is being added to the energy charge. This will result in an ECA that will be much closer to $0.00 after the adjustment. If the energy component of the cooperative’s power bill goes down the ECA may be negative while an increase in the energy component of the power bill may cause a positive ECA. Many of our members have requested that the ECA be included in the energy charge. This change will accomplish that and we hope that the ECA remains a very small amount.
Service Availability Charge – An increase to the Service Availability Charge is being considered. For most classes the charge will increase from $15 per month to $30 per month. Some of the commercial classes will see the implementation of a $90 per month charge. The increase will more accurately reflect the fixed costs of providing electric service. This charge must accurately reflect these costs in order to keep them out of the energy rates. When fixed costs are included in energy rates, the cooperative can see a windfall in margins if sales of electricity rise or it can see its margins erode when sales decline. It is better for the cooperative and its members if the fixed costs are recovered properly. When the Service Availability Charge is accurate, no members are overcharged for higher use of electricity and no members are undercharged for lower use of electricity. The increase in revenue from the new Service Availability Charge will be offset by a decrease in the energy charge. An average use customer will see no change in their bill other than the 1% overall revenue increase. Low use customers will see an increase in their bill while high use customers will see a decrease in their bill.
Seasonal customers will see a phase-in of the increase to their Service Availability Charge. The current $10 per month charge will increase to $30 per month over the course of three years.
This increase will be partially offset by a decrease in the energy rate. The rate of return for the seasonal class is significantly deficient and this class will see a revenue increase of $135,281.
Consolidation of Classes – The increase in the Service Availability Charge allows the opportunity to consolidate some of our rate classes. The reduced energy charge in conjunction with the increased Service Availability Charge alleviates some of the need for the various rate classes associated with usage characteristics. The following classes will be grouped into the existing General Service class: Electric Heat; Seasonal Electric Heat; and Seasonal. The following classes will be grouped into the existing General Commercial class: General Commercial-Primary; Commercial Service-Kansas Wildlife & Parks; General Commercial Service-Schools; and Large Commercial.
The charts below provide details of how bills change under the proposed changes. The column on the left shows kWh usage. If you find your usage as shown on your monthly HREC bill, you can look to the right to see the amount charged under the existing rate, and then the amount that would have been charged under the proposed rate. The change in the bill and the percent of change are also listed.
General Service:
The total energy charge of drops by more than 16 percent while the customer charge goes up by $15. Members who use 1,000 kWh see their bills drop by 72 cents each month. Those who use more see additional savings.
Electric Heating
Members will see the tiered system eliminated as a flat rate is applied to kWh usage. Average users in this rate class will see their winter bills go up by $3.85 each month and summer bills go down by $7.62 each month.
Seasonal Electric Heat
With the tiered system eliminated, members will see the Energy Charge drop more than 30 percent. Average members will see a small increase in their winter bills, and a larger decrease in their summer bills.
Seasonal Service
Members will see the energy charge drop by more than 32 percent, but will be impacted by a phased-in increase of the Customer Charge. Average members will see their monthly bills increase considerably. Members with a very low usage will see the greatest increase in their bills due to the Service Availability charge. Members with larger usage will see savings due to the lower Energy Charge.
Heat Pump
Members will pay the same rate as everyone else in the summer, and a lower rate in the winter. Average consumers will see a small increase in their winter bills and a larger decrease in their summer bills.
Small Commercial
Businesses in the Small Commercial class will receive a discounted Energy Charge, but will pay the same $30 Service Availability Charge as everyone else. Average consumers will see their monthly bill increase by only about 36 cents.
Coincident Peak Billing-Large Commercial Class – Customers in this class will be billed for their contribution to the coincident peak demand of the cooperative. Metering technology now allows the cooperative to measure the coincident peak contribution of these customers and include that as a billing component. These customers have varying usage characteristics which can significantly affect the cost of power purchased by the cooperative. Coincident peak billing makes these customers responsible for their usage characteristics and greatly reduces the subsidy inside the rate class. This class groups into the General Commercial class which has utilized coincident peak billing for several years.
Security and Street Lighting – Unmetered lights and Walnut street lights will be adjusted to include the ECA in the monthly charge. Metered lights will be adjusted for increasing costs of maintenance.