Studying For a Rate Increase
In planning for the upcoming rate increase in April, the Access Energy Cooperative Board of Directors reviewed our “Cost of Service Study.”
The cost of service study considers all of the cooperative’s costs of doing business, spreads them to our different rate classes. It then calculates how much revenue is needed from each rate class to cover the costs of providing electricity to that type of service.
The vast majority of our membership has a single phase service and are billed under this rate classification. We also have several different classes of three phase service. The rate classification under which our three phase services are billed is based on the size of their load.
The goal of the cost of service study is to make sure that our rates reflect what it actually costs to provide the service. One thing we want to avoid in setting rates is one rate classification subsidizing another.
The model used for the cost of service study was based on our budget projections for next year. This includes an eleven percent increase in our wholesale power costs, along with increases in our interest expense and other expenses such as fuel, materials, wages and benefits.
Based on our model we will need to increase our revenues by about 2.2 million dollars. This will require an overall rate increase of fifteen percent. One thing I want to stress is that not everyone will see a fifteen percent increase in their rates. Based on our final rate design, some members will see their rates go up more than fifteen percent and some will see theirs go up less than the fifteen percent. The Board of Directors hopes to make a final decision on our new rates this month.
LAND PURCHASE
On December 23, we closed on the purchase of the land on the west edge of the community of Mount Pleasant for our future headquarters facility. We have purchased 22 acres on the south side of Washington Street across from Riverside Paper.
Many of you may be wondering how much of an effect a new headquarters will add to the rate increase that I have just discussed. Our current estimate, based on what it has cost other cooperatives to construct new facilities in their communities, would require an increase of a little over two percent of our revenues. We have hired Larrison & Associates of Davenport, Iowa to serve as our architects for this project. The final decision to proceed with this project will be based on their design estimates.