What is causing increases in energy prices?
Access Energy Cooperative continues to see increases in our wholesale power cost. On April 1, our wholesale rates will increase about nine percent. This amounts to about a $750,000 increase over last year.
Our power supply cooperative Associated Electric Cooperative Inc. (AECI) has also informed us that we can expect further increases in 2008 and 2009. You are probably asking yourself: what is causing these increases? The main drivers are growth and fuel cost.
GROWTH:
The distribution cooperatives in Iowa, Missouri, and Oklahoma that own AECI are growing. AECI’s load grew over 100 megawatts from 2005 to 2006. To put that in perspective, Access Energy’s total system load is 48 megawatts. AECI is adding load each year that amounts to two times our entire system.
Our growth has impacted rates in another way too. AECI has been very successful in using our generating facilities to make sales to other utilities when those facilities are not needed to meet our load. These off system sales produced revenues that kept our rates below AECI’s cost of production. As our load has grown, the amount of surplus capacity has been reduced. This reduces the amount of revenue we gain from off system sales. This is another factor causing our wholesale rate to go up.
FUEL COST:
As I have discussed many time in the Highline Headlines, handling this growth is requiring us to build new generation, but that is just driving a part of the increase. Our power is produced from basically three sources: coal, natural gas and hydro.
Hydro is by far our most economical resource. Our hydro is purchased from the Southwest Power Administration (SWPA) and is produced from dams on the White River in southwest Missouri and northwest Arkansas. Due to the drought in this area for the last few years, the amount of electricity we get from these facilities has been reduced by about 30%. The short fall from the hydro must be made up from our more expensive sources.
Our next most economical resource is coal. Due to the growth on the AECI system, our present coal plants are being fully utilized. When this happens, we must turn to using our natural gas plants on a regular basis. Our natural gas units are the most costly plants for us to run. Electricity from our natural gas plants cost about 5.5 times what it cost to run our coal units.
As you can now understand, our growth is causing us to utilize our more expensive generation facilities and that is driving up our costs.
Rising fuel costs directly impact our wholesale power cost.
Both the cost of coal and natural gas are increasing. Our primary fuel is coal. AECI is projecting coal prices to increase by 25 percent over the next five years. Transportation