By: Tony Anderson, General Manager Cherryland Electric Cooperative

We don’t “cook the books” at your cooperative but we do need to be good at baking the right “pie”. While each cooperative is similar, we each have a slightly different “recipe” to follow.

At Cherryland Electric Cooperative, we have ingredients like 3,000 miles of overhead and underground line, 52 employees, 34,000 meters, 1,400 square miles of geography, weather, big trucks, little cars and taxes to all sorts of governmental entities.

What kind of “pie” do we “cook” with all this “stuff”? It is something called the “cost of service study”. It is a time consuming intricate recipe we cook up every 4-5 years. In the fall of 2014, the task fell to Cherryland Rates Analyst, Jason Rice, with the assistance of experienced engineers and accountants at a firm called Power Systems Engineering. Over a period of months, they painstakingly went through the necessary calculations to make sure each class is being charged properly.

What is the big deal? We want each class to stand on its own. This means commercial members should not be subsidizing residential members and vice versa. It would be easy to lower commercial rates and make up the losses on the backs of area homeowners. Obviously, this would not be fair.

I am happy to report that the results of this year’s study are very positive. On revenues of nearly $49 million, we found it necessary to make corrections amounting to less than 2% of our total revenues.

In 2015, 4 of our commercial rate classes will see decreases that will range from 5-7 percent. Because our revenues and expenses are forecasted to be sufficient to meet our future mortgage requirements, we will NOT be adding these cost of service reductions to other rate classes. We will simply be reducing our estimated 2015 revenues by $654,000.

Residential members will not see an increase in rates for the 4th year in a row. The cost of service study did indicate that the availability charge (the monthly charge necessary to recover costs before any electricity is used) should be raised from $15 per month to almost $24 per month. However, your management team and board of directors agreed that this change is better left to a year when it is also necessary to increase our revenues.

While expenses are increasing in 2015, financial forecasts show that we should be able to get through 2015 with sufficient margins to maintain our strong financial position. Thus, the timing is not right for making a big change to the availability charge.

One could argue that the low availability charge does cause a higher energy charge. This argument would be absolutely correct. I would counter with the fact that this has always been the case at Cherryland. It is simply the way we have chosen to cover our costs. Energy costs plus availability charge must cover the cost of service for each rate class. There is no real “right” way to get to this number.

I am very pleased with the results of our cost of service study and also with the bright financial outlook for Cherryland in 2015 and beyond. We will continue to update and tweak the cost of service in the years ahead to make sure that each rate class continues to fairly carry its own weight as we move forward.