Rate Increase April 1, 2008
As I have shared with you over the last several months, our rates will be going up effective April 1. This will be our third increase in the last three years, and we are expecting increases next year and most likely the following year.
Two things are driving these increases: our cost of producing electricity is going up and we are using more of it. Our wholesale power makes up about 55% of your total bill. We have had increases in our wholesale power cost for the last four years that have amounted to a 46% increase.
The two main things driving the increases in wholesale power costs are: fuel cost and environmental compliance. Costs for coal and natural gas, the main fuel sources for our generating plants, are up significantly. A recent Wall Street Journal article pointed out that coal has become a global commodity like oil and grain. Just like oil and grain, the emerging economies in the Far East are beginning to import significant quantities of coal. The increase in the use of natural gas for generating electricity has resulted in higher demand, resulting in an increase in the cost of natural gas by almost 300% since the mid 1990’s.
We are dedicated to being good stewards of our environment, but it does come at a cost. We have spent over $680 million dollars complying with nitric oxide and sulfur emissions. Soon we will be investing in equipment to control mercury emissions. We are also expecting to be controlling our carbon emissions in the not-too-distant future. Reducing carbon is going to be very expensive and will impact more than just your electric bill.
While these investments are good for the environment, they don’t produce any more electricity.
Our demand for electricity is expanding. In the last ten years, we have seen our load grow over 35%. We are simply just using more and more electricity. This growth is requiring us to use more and more natural gas and to construct a new baseload power plant. One thing to remember: each new kilowatt hour costs us more to produce and costs you more to buy.
The only way you can reduce your bill is by using less. In some ways, the Cooperative is like the local gas station. Just like the gas station can’t tell you what kind of car to drive or how much you can drive it, the cooperative can’t tell you what kind and how many appliances you have in your home or tell you how much you can use them. We can help by educating you about your energy use and by offering rebates for more efficient appliances, but it really comes down to the decisions you make about your energy usage.
One concern that has been raised is how the new headquarters is impacting your bill. For a typical member who uses about 1000 kWh a month, your monthly bill will be about $105 when the new rates go into effect on April 1. This will be about a $25 increase over the same bill in 1986. Of that $25 increase, about $17 goes to cover the increases in our wholesale power cost since 2005. The cost for the building accounts for less than $2. The remaining $6 goes to cover all the other cost increases since 1986, such as increases to purchase equipment, the fuel we buy to power our vehicles, increases in copper, steel and other materials we use to build lines, and other inflationary cost increases. As you can see the cost of the new building is having a very small impact on your monthly bill when compared to the other factors.