Proposed 2018 Rate Increase
September 28th, 2017
Written by: Tony Anderson
The Cherryland accounting team has completed a cost of service study and a 10-year financial forecast. Internally, staff has debated our options for a rate increase in light of the results. We have discussed them again with your board of directors. The next step is to talk to you, the members of Cherryland Electric Cooperative.
What kind of rate increase are we going to be talking about? The proposed increase is a change in the monthly availability charge for residential meters. My recommendation to the board is to move this charge from $15 per month to $18 per month. For general service accounts, I will be suggesting a $2 per month increase. This will go into effect in the first quarter of 2018.
Obviously, the percentage of this increase will be determined by the size of your monthly bill. Based on average usage, a three to four percent increase in the monthly bill will be seen by 75 percent of our residential members. Higher than average users will see less and lower than average users will see more.
Why $3? When we look at all the costs involved with making electricity available to you at the flip of a switch, we come up with an availability charge of more than $27 per month. I believe an incremental change is more palatable to our members than a huge $12 per month change. The $3 gets us the revenue our studies say we need to maintain a prudent financial condition for at least the next three years.
Also, if we were to go to the full $27, it would require a sizeable drop in the monthly energy charge to avoid generating excess revenues. A lower energy charge would greatly reduce the incentive to conserve energy. Due to state energy conservation mandates and a desire to maintain level wholesale power costs, I feel like it is better to keep energy charges at today’s level.
There will also be a revenue neutral change to your monthly bill. Today, you see an energy charge and a power supply cost recovery (PSCR) charge. The energy charge is fixed and does not vary from month to month. The PSCR charge is set monthly and has been used to balance our budgeted wholesale power supply costs with actual charges incurred each month.
While the PSCR allowed us to respond to variations in power supply costs, it hasn’t changed much over the last few years and thus, should really be rolled up into the permanent energy charge. Our short-term outlook for wholesale power looks very stable for the next couple years.
So, for now, we will simplify your bill by combining the energy charge and the present (and long used) PSCR charge into one line item on your bill. This will appear like we increased the energy charge, but in reality, you will be paying the same price as the PSCR line will go to zero for at least the next 12–24 months.
As you will see noted in the “Co-op News” section on page 4 of this magazine, there will be a 5:30 p.m. informational meeting regarding the proposed changes for all members at cooperative headquarters on October 12. On October 16, there will be another meeting at the cooperative at 9 a.m. If neither of these dates work for you, we are happy to come to your home, township, coffee shop or have a private conversation at our office at your convenience.
I look forward to the upcoming member meetings. Your calls and questions are welcome at any time as well. Rate increases are not fun for anyone, but if we all communicate, we can make the best of it and move your cooperative forward on solid financial ground.
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