Rate realignment to reduce power cost volatility

Posted on Oct 02 2021 in Kankakee Valley REMC
Kankakee Valley REMC CEO Scott Sears

Kankakee Valley REMC is not only your power provider; we want to empower you as well. And one way we do that is by informing you about what’s going on with your cooperative, your electric service and your electric bill. After all, knowledge is power as the saying goes.

In the August issue of Indiana Connection, we detailed what each portion of your bill actually covered. The next month, we explained how the facilities charge recouped the costs of transporting electricity from the power grid to your home. This month, our focus is on rates and, more importantly, a recent decision made by your board of directors.  

Rates — Basically, your co-op’s rates are designed to (1.) produce sufficient revenue to deliver reliable electric service and (2.) assure the cooperative maintains a solid financial condition.

The wholesale power costs from our power supplier, Wabash Valley Power Alliance (WVPA), are included in the rates. We currently purchase power from WVPA for residential member-consumers at an average of 8 cents per kWh. The current residential rate is .09699 cents per kWh. Even if the WVPA energy costs or your energy use fluctuates, your rate per kWh doesn’t change. Plus, your co-op’s budget is set based on kWh sales.

Because of this current rate structure and our budgeting, our revenues are dependent on the weather and any change in your electric use habits. 

So what does this mean? When we instituted a rate increase in 2009, we were able to collect 80 percent of our fixed costs through the facilities charge. Then in 2012 we raised the energy charge. Today, due to increasing costs, the percentage of fixed costs collected through the facilities charge has dropped to 59 percent. Though the cost of doing business has gone up, we haven’t passed along the increase to you. Instead, we have been able to offset those increases with margins from energy sales.

The board of directors believe that to ensure our overall business costs are covered, we should collect 100% of the fixed costs through the facilities charge. This eliminates the variability and our dependence on energy sales.

Realignment — To create a system in which we only collect what we need to operate, we must realign our rates. For our residential member-consumers, the energy charge will drop from .09699 cents/kWh to .08174 cents/kWh.

In addition, their facilities charge will increase from $30/month to $48.50/month. The overall impact to an average residential member-consumer, using 978 kWh per month, will be a monthly increase of $3.59. The actual impact to your bill will depend on how much energy you use. If you use 1,250 kWh per month or over, you will see savings on your bill. The change in the facilities charge will affect all rate classes, not just the residential member-consumers. The rate realignment will go into effect on the bill you receive in January.  

Your leadership team is committed to being fiscally responsible while balancing your expectations of service reliability and affordable rates. Decisions like this, although difficult, are essential. I will share more information with you next month as we continue to work to realign the rates.