Helping You Understand Electricity Prices

Posted on Sep 03 2023 in LaGrange County REMC
Mark Leu

You have probably noticed that the daily cost of living has increased across the board. Inflation has impacted everything from the price of gasoline to eggs, and costs for the fuels required to produce electricity have also risen. I wanted to explain some factors that impact electricity prices (and your energy bill) in this month’s magazine.

There are a few key elements that impact electricity prices and rates. Some of these factors LaGrange County REMC manages, some of them you can impact and other factors are beyond our control. Let me break it down:

There are three primary parts to your monthly electric bill: a minimum service charge, a capacity charge and a wholesale power charge. The first is a fixed monthly charge, which covers the costs associated with providing electricity to your home. This includes equipment, materials, labor and operating costs necessary to serve each meter in LaGrange County REMC’s service territory. In order to ensure the reliable service you expect and deserve, we must maintain the local system, including power lines, substations and other equipment.

Like many businesses, we’ve experienced supply chain issues and steep cost increases for some of our basic equipment. For example, the cost of a pad-mount transformer went from $1,253 in 2020 to $2,000 this year (a 60% increase) and wait times to receive this equipment are up to 7–8 months. Because we are a not-for-profit cooperative, some of these expenses must be passed on to our members.

The other two components of your monthly bill are based on kilowatt-hours (kWh) and cover how much energy you consume. The amount of energy you use can vary from month to month and is typically impacted by extreme temperatures. When temperatures soar or dip, your cooling and heating equipment runs longer, which increases your home energy use. Energy consumption is an area that you have some control over, and you can lower your monthly bill by reducing energy use. Your thermostat is a great place to start, so try keeping it close to 78 degrees Fahrenheit during the summer months. We also offer free energy audits to help you find more ways to keep your home comfortable and energy bills lower.

The last component of your bill, the wholesale power charge, is specifically our cost to purchase your electricity from the bulk electric grid. This charge has increased quite a bit over the past couple of years because of higher fuel prices and a tighter supply, which means the power that LaGrange County REMC purchases from our wholesale provider is more expensive.

I hope this information sheds light on some of the factors that impact electricity prices. While we can’t control the weather or the rising costs of fuels, please know that LaGrange County REMC is doing everything possible to keep internal costs down.

We’re here to help you, too. Contact us if you have questions about your energy bill or for advice on how to save energy at home.