As a not-for-profit cooperative, St. Croix Electric Cooperative (SCEC) is here to serve our members. We’ve worked hard over the years to maintain fair and reasonable rates, while supplying you with reliable electricity.
Over the past two years the economy has seen record inflation and supply chain issues that have caused significant price increases. While pre-purchasing inventory, solid growth and cost cutting have allowed us to hold our prices flat the past two years, we find ourselves needing to adjust our prices this year.
As I mentioned in previous columns, we’ve seen 15% to 20% increases in equipment and supply costs annually the past two years. Additionally, Dairyland Power Cooperative, our wholesale power supplier, passed its budget at the end of November resulting in a 4.2% power cost increase for SCEC. This 4.2% increase is of significance in that 70% of the SCEC’s costs are a pass-through of the wholesale power bill from Dairyland Power Cooperative. These inflationary cost increases are the driving force behind SCEC’s need for additional revenue.
The industry also saw an increase in the volatility of the energy market the past few years with extreme cold and wholesale market price fluctuations. We tried to mitigate the impact of these fluctuations on members by deferring some power supply margin from Dairyland Power Cooperative in the previous year to offset potential PCA increases last year.
Why Implement a Fixed PCA?
SCEC has elected not to change its fixed charge, demand or energy rates at this time; however, the Cooperative is implementing the rate increase through a fixed Power Cost Adjustment (PCA) on members’ monthly energy bills. The intent is to have the same PCA apply throughout 2023 while we undergo a new cost-of- service study and comprehensive rate design.
To help minimize the rate increase, SCEC is also deferring approximately $186,000 of Revenue Volatility Credits and excess margin we received from Dairyland Power Cooperative at the end of the year into 2023 to offset some of the wholesale power increase we are expecting.
Until a new cost-of-service study is complete and new rates designed, we will have the ability to adjust the PCA up and down if the Cooperative is incurring more or less power costs than forecasted. This will not only cover the anticipated power supply cost increases we are incurring, but also gives us a convenient mechanism to timely give funds back to our members if they are not needed, while maintaining the health of the Cooperative.
Our goal in deferring some revenue and implementing a fixed PCA for the increase is to minimize the impact of a volatile energy market on members while providing the revenue the Cooperative needs to remain fiscally strong. An updated cost-of-service study will provide us with a clearer picture of the rate adjustments needed to maintain our rate design principles of cost causation while providing safe, reliable and affordable energy for all.
What is the Impact on the Average Member?
Beginning this month, members will notice a PCA on their energy bills for January usage of $0.0044/kWh. This PCA was calculated based on 2022 year-end estimates prior to year-end. Now that we have closed the books on 2022, the PCA will be adjusted to $.0062/kWh on the February energy bills and will remain fixed at that amount until the end of 2023. For the average member, the PCA will equate to an approximate 5% bill increase.
The increase each member sees will vary, depending on usage. For example, an average residential member using 1,200 kWh a month should expect to see an approximate $7.50 increase to their monthly bill.
According to Consumer Price Increase data released on January 12 by the U.S. Bureau of Labor Statistics, consumers paid, on average, 14.3% more for electricity last year over the previous year. This is more than twice as much as the 6.5% overall rise in prices during the same period. The good news is that when compared to nationwide trends, SCEC’s increase is well below that average. Other than a fixed charge increase in 2019, SCEC has not raised its rates since 2013. As inflation impacts not just the energy industry, but our entire nation, know that your Cooperative remains committed to keeping safe and affordable electricity available for all our members.
Until next month,