I wrote about Cherryland’s upcoming rate increase a couple of months ago. I covered the “what” regarding residential availability, energy costs, and how an average member will be affected. In today’s column, I will try to get into the “why.” Reliability, metering, materials, and power supply are all coming together to form one snowball that gets larger the further it rolls down the mountain.
To keep the lights on reliably, Cherryland typically invests $3 million to $4 million annually in upgrades and rebuilds across our 3,000 miles of overhead and underground distribution system. The need for this will not change in the future. Halting or cutting these investments would save money today, but it would only delay the improvements to a later time when costs will be even higher. Our distribution system isn’t much different than your house. Keeping up on maintenance and upgrades will avoid bigger infusions of cash in the future.
The cost for all the parts and pieces involved has changed significantly since the start of the pandemic. I find myself wishing that material costs “only” went up at the rate of inflation. An 8% increase is simply wishful thinking. Underground cable is up 49%. The overhead conductor is 88% higher. Transformers have increased by 32% (if you can find them). Bucket trucks have a three-year lead time and price tags that are 28% higher than a few short years ago.
In 2006, we started installing Cherryland’s first-ever automated meter reading (AMR) system. That system is nearing its end of life. In 2023, Cherryland will begin installing the newest generation of AMR meters. This 3- to 4-year project will cost approximately $7 million. This will be on top of the $3 million to $4 million in regular reliability improvements.
Supply chain issues have required us to order all these parts and pieces more in advance than in previous years. Once upon a time, you could walk around our warehouses and pole yard, and there would be $500,000 in inventory on hand. Now, this number has more than doubled and may soon be tripled. The days of one phone call and 30-day delivery have given way to multi-year planning with lead times of widely varying lengths.
Higher prices, longer lead times, and more stock on hand lead to more borrowed money at higher interest rates. Investments in the distribution grid lead to higher depreciation of assets on our books. Interest and depreciation expenses round out Cherryland’s top-five costs after power supply, wages, and tree trimming. Oh, by the way, power supply, wages, and tree trimming have all increased too!
Now, I know this accumulation of factors may come off as a bit of “gloom and doom.” Please don’t take it that way. This rolling snowball of financial issues is simply the state of affairs for your cooperative at this place and time. You have a board, management team, and employee group capable of handling the future.
Stop and think. With everything I listed above rolling at us, the rate increase I wrote about previously is still only 2.7% for the average member. If that isn’t taking a bat to a snowball and crushing it, I don’t know what is. When the snowball gets to the bottom of the mountain, we will still be standing and ready for whatever rolls down next.
For more information about the proposed rate change, click here.
It would be nice to be able to compare any cost savings due to renewables and to know if there is any offset benefit for coop members to install renewables.
Any local solar installer can do those calculations for you. I encourage you to reach out to the reliable vendors in our area. Be sure they are local and not headquartered outside of northern Michigan. You want someone who will back up and stand by what they sell for the life of the system which is ofter 20-25 years.
I really appreciate the efforts taken to keep price increases reasonable in this time of extreme price increases and supply chain issues.
I think it’s reasonable to anticipate that the push for electric cars, etc., will increase demand, worsening both prices and supply issues, which makes procrastinating on buying parts not a good alternative.
That said, I have a few questions:
1. Have the automated meter readers truly proven to be beneficial, or just a “keeping up with the big guys” ?
2. Are the newer generation automated meter readers sufficiently better to justify the expenditure, or is the replacement necessary because the old ones are dying, or again, just feeling the need to have the latest and greatest of everything?
3. Are there any other areas of expenditure that really aren’t necessary/advantageous long-term?
Let’s take your questions one at a time: 1) Yes, the automated meters have more than proven to be beneficial. The first generation has paid for itself. This coming next generation may take longer to do so but after close to 20 years, it just has to be done. 2) The new ones are better – faster and more information access. The old ones are dying on a daily basis. If we kept the old technology, it would cost us over $50,000 per year to replace dying meters. Then, there is the issue of lost revenue when a meter dies. 3) We look at unnecessary expenses all the time. We will do our best to continue those efforts.
The folks complaining about the 2.7% most vociferously will be the same subset who vote for the politicians / policies causing these inflationary, labor, supply-chain, and limited energy-option issues. Keep up the good battle, Tony / CEC, and thank you.
Foremost is the the undisputed fact that Cherryland Electric has, and remains roll model status that most companies can only dream of achieving! Nice to see the true and actual inflation costs stated correctly, not the across the board inflation figures our government economists wants us to believe . Thanks for all you do Cherryland !
Thanks for the kind words. I am proud of the Cherryland team as well.
Please explain why those members who use less Kwh pay MORE for the availability charge. It seems to me the opposite should be the case. Being one who uses less than 250 Kwh/ month, most months, and puts power back on the lines in the summer(excess solar), I really feel cheated by this . Most months, my bill is almost entirely due to the availability charge. This increase for the homeowner using alternative power is another disincentive to do so. The co-ops policies and rates should HELP those wishing to reduce our carbon footprint (yes, I know I get credit for my excess power), not penalize them. Seems like a corporate plan, not a cooperative one. John Ingwersen, Elmwood Township.
Availability means just that – availability. It costs a definite amount to have the poles, wires and transformers in place so the electricity flows any given hour you want to have it. This cost is the $28 per month. It’s that simple. In your situation, you are using the grid in place of a battery. You may want to check out the price of a battery to see if you can get one cheaper than $28 per month.
Tony, This is a rather dismissive and borderline rude answer. His question is valid. As someone who myself is considering getting solar system, this change in corporate policy is most certainly hurting home renewable energy! As you’ve put it in the original article Those who use more power are paying less. This is a fact. The availability charge is being raised so that the company makes more off of those who use little. Now add this to the fact that you’ve made energy (kw/h) cheaper and it’s a double hit to those putting power back from excess home solar. Can home solar system owners charge you for their availability? After all there was a VERY real expense installing that system and I know it WAY higher than $28/mo!
I disagree. The answer simply stated the facts of the charge. I understand that the return on a renewable energy system is changing slightly. I also understand that it is fair. Every member of Cherryland subsidized renewable energy for about 20 years. That was knowingly done to encourage the technology. Solar panel prices dropped. The technology became more mainstream. Thus, the subsidy needed to stop. Those who use more power are now paying a rate that is more fair than in the past. Whether some want to believe that or not, it is true. Home solar users cannot charge the coop for making solar energy available because they cannot guaranty when the solar energy will be available to the coop nor can they guarantee how much will be available. In this availability charge the coop is absolutely guaranteeing that you will have electricity at the flip of a switch AND you will have as much as you need. This is far better than any battery option. You can’t use the grid for a battery and complain about the cost when the cost is fair (which this one is). If I was borderline rude, I apologize. If you go back over this blog in the past several years, you will see that I have had this renewable energy conversation on more than one occasion. Happy to have it again today but also trying to keep it simple. If short and simple is rude, I apologize.
Ah, The internet is great for many things but conveying emotion with text is not one of them! I probably mistook the brevity for terseness. As to the charging for their solar availability; that was rhetorical, but also meant to make you consider the people most hurt be the change are ones that have supported the renewable initiative.
Thank you for the reply.
I don’t mind a small rate increase that applies to the electricity I use. What annoys me is this availability charge. I’ve read all your justifications arguing that it’s fair, but I adamantly disagree. All businesses have overhead costs and they recoup the cost of their overhead within the price of their product. People who purchase more product pay more of the overhead cost. If a grocery store charged every customer $5 per visit to cover their overhead costs regardless of how many groceries they purchased, they’d be out of business in no time.
Imagine two retired couples at the end of a long country road that need to pay $4700 for an upgrade or maintenance on the lines down their road. If one couple lives in a multi-million-dollar mansion with average monthly electric bills of $400, while the other couple lived in a small, efficient house with average monthly electric bills of $70, both couples would expect to pay for the work proportional to their usage. One would pay $4000, the other $700. Everyone would see that as fair. If the utility charged them both $2350 and called it an “availably charge” anyone with a normal sense of fairness would say that’s outrageous.
Can you explain why CEC thinks their customers who purchase more product shouldn’t pay more of the overhead costs? I’m looking for a better explanation than saying it costs the same amount to install a line regardless of how much electricity people use. It costs a lot of money to build a grocery store that will serve a community. They don’t charge every person in the community a fixed availably fee just to have the grocery store there. It’s fair for people to cover the cost proportionally to the product they buy.
As you have indicated, I have answered your question in many of the responses to comments on this topic. Cherryland is a not for profit electric cooperative and not a grocery store. Your analogy doesn’t match up with our business model. I would counter your example with that of a bar that charges a $5 cover charge. Everybody inside pays the same price for each beer. Those who drink more beer have higher beer costs but they don’t pay more for the cover charge AND more for the beer. In your theory, there should be no cover charge and each beer should be a higher price. On your country road concept, our model never requires anyone to pay for repairs or maintenance of their specific line section. Everyone pays the singular availability charge and all lines are maintained. The cost is shared. Everyone pays the same price for energy too. Use more energy, get a higher bill. Use less energy, get a smaller bill. Fairness – over and over again, this is all this change is about. We tried to get here over a long period of time. It didn’t work. The time to finally get it right is now. You can lay the blame for the delay at my feet but we will have to agree to disagree on the fairness issue. Thanks for providing the input.
PS: I assume it’s too late to stop the current availability charge from taking effect, but I hope you’ll reevaluate this issue in the near future and consider scrapping the availability charge, or at lease reducing it so that most overhead costs are distributed proportional to usage.
It is too late. We had two public input sessions after which the board voted to approve the change.
Tony you are a great communicator and a better manager! Keep up the good work.
Thank you!
At least it’s not $30 like it is in kalkaska!!!!!!
Didn’t CE come out a year or so ago and proudly claim a goal of reaching 25% of electricity being generated from wind and solar? How’s that working out for you and us? Instead of relying on cheap, clean, and abundant energy like coal, nuclear, and natural gas, all of which the US has some of the largest reserves in the world, you embrace the woke “new green deal” lunatic BS. Now we are all paying the price, just as intended. Everything negative going on right now (supply chain, inflation, stocks plummeting, and soaring energy costs) is all self-inflicted by embracing the polices of the lunatic left running this state and country. When……..when are THE PEOPLE going to wake up to this garbage?
What Cherryland proudly talks about is the fact that our power supply is 62% carbon free. 20% comes from wind and solar (mostly wind) and 42% comes from nuclear. It is working out well for us. We also have coal and natural gas generation. Affordable and reliable is all about a diversified portfolio. We are very diversified. I take some offense to the words “embrace the woke green new deal lunatic BS”. I am far from “woke”, “lunatic” or “BS”. You only have to go back through years of this blog to realize that. Cherryland strives hard to not have “all our eggs in one basket” when it comes to power supply. There are many reasons for our first rate increase in 5 years – power supply is just one of the many reasons.
I feel fortunate that someone is keeping power on at my house. It lets me focus on other responsibilities. It has not escaped my attention that energy costs are rising but I’m blessed with the luxury and the ability to afford it. Cheers to those who speak up and for open dialogue with cherryland electric.
You DID NOT answer my question. Sure you gave ” the facts of the charge”, but I can read a table, so there was no need for that. Why do those who use less power off the co-op owned lines pay more for that availability than those who use more power from this grid? Your stock answer “availability costs,” does not cut it. You are charging someone who uses 0 Kwh $28/month ( if I used 0 Kwh I would not NEED the availability!) and someone who uses 700Kwh a tenth of that!( they need the avialabilty 700x more than the low user!) That’s like charging someone who drives 100 miles a day less for a battery than one who drives 10 miles a day. Is this logical and fair? Isn’t it true that the more one uses something, the more maintenance, parts, etc. are required? Again I stress that using less electricity is a good thing, and should be rewarded, not charged.
John, I sincerely believe I answered your question. Maybe I am failing at making the point that there is a fixed cost for making electricity available at the flip of a switch. Every member, whether they use ZERO or 7,000 kWh, has the same responsibility for these fixed costs. Every member pays the same price due to this shared responsibility. When we have the availability charge right (which we now do), we only have to pass on the cost of the energy used. This is what we are doing. You are paying $28 availability and have zero energy charges. The member using 700 kWh is paying the same $28 and energy charges for each of the 700 kWh used. Your car battery example is a good one. The car battery costs the same amount for both individuals yet one individual only drives 10 miles and the other 100. Where their costs differ is in the energy they use. Where the example differs from electricity is in the moving parts of the car that wear out. There are no gears or motors in the electrical distribution system that takes the energy from the substation to your home. I fear this answer has gotten rather long. I hope it is now more clear.
I deal with both DTE and Cherryland, as I have property both up north and in the Detroit area. To be perfectly honest I will take Cherryland hands down. You can teach DTE a lot, about customer service and cost management. I lost power at both houses this past summer, Cherryland, let me know power was out, gave me regular updates and power was back on with in 6 hours. DTE updates were a joke, power was out for 2 days, and no apologies for anything. As for the increase in cost, 2.7% is not that bad, I will happily take over what DTE wants to do.
So thank you for everything you do for your members, including staying up to date on technology, customer service and just communicating with your members.
Thank you for sharing your experience. It is appreciated.
Mr. DeCamillo—-You seem to have ignored the issue of climate change. It’s real. We have to make the change to renewables. It will cost more in the short run but is necessary. Of course if you are a climate change denier, then you cannot be reasoned with.
So sad.
Thank you Tony for the dependable electric service. . When I used to live @ a recent address served by Cherryland, we lost power once every 10 years during horrendous winter storms. My friend and neighbor, a DTE customer, on the next street over from me, would be w/o power on a regular and unplanned basis. If a flock of geese flew over his street, blip, start up the generator. Oh no, a car honked it’s horn, blip.
Always warms my heart when I read stories like yours about OTHER utilities. Thanks!
Tony- The chart that Cherryland posted on this site says that using 0 Kwh has an availability charge of $28/mo, but if you use 700Kwh hours you are charged $2.93(Estimate). That differs from your answer that both members pay the same for availability, which is false, at least according to the chart. Again, you are encouraging members to use more energy by charging less(for availability) to use more, which is pretty screwed up if you’re trying to reduce carbon footprint. Please look at the chart and give me an answer. Thank You
The chart is accurate. Everyone is paying $28 per month availability. The energy charge is lowered. The $2.93 you talk about on the chart is the difference between the old rate and the new rate once you factor in the $10 increase in availability charge and an almost 1 penny decline in the energy charge.
Thanks, I did the math, and the cooperative is charging the same to everyone for the availability. Still, I think the way it works out penalizes the persons trying to reduce their energy use, as their monthly bill increases more. But that’s corporate America-“Any thing worth doing is worth overdoing.” It is up to us- if we want to reduce carbon emissions-we need to consume LESS. The cooperative should encourage this in the way they bill their members.
In the spring, we will be offering a time of use rate. This will allow those members who want to move usage off our peak to save money when they do so. Watch future emails for details. One last point, all Cherryland members enjoy a power supply portfolio that is over 60% carbon free. I expect this to grow to over 70% in the next 3-5 years. Thus, just being a Cherryland member improves the environment regardless of how much or how little one uses.