Understanding electricity pricing

Posted on Aug 23 2023 in Noble REMC
President and CEO

In a recent discussion about the ever-rising daily cost of living, I was asked what impacts electricity prices. 

Just as inflation has impacted everything from the price of gasoline to the price of eggs, costs for distributing power to your home have risen. Fortunately, Noble REMC electricity prices have increased only slightly compared to the cost of inflation over the last couple of years. Electricity still remains a great value, with the average member paying around $5 a day.

So, what ultimately impacts electricity prices and, in turn, energy bills?

While there is no short answer, there are a few key elements that impact electricity prices and rates. Some of these factors Noble REMC can manage, some of them you can impact and other factors are beyond our control.

There are three primary parts to your monthly electric bill: a fixed monthly charge, an energy/kWh charge and a power cost adjustment (PCA). To understand your total energy costs and what impacts your bill, let’s unpack one piece at a time.

The first is a fixed monthly charge, which covers a portion of the costs associated with providing electricity to your home. This includes equipment, materials, labor and operating costs necessary to serve each meter in Noble REMC’s service territory, regardless of the amount of energy used. In order to ensure the reliable service you expect and deserve, we must maintain the local system, including power lines, substations and other necessary equipment. Like many other businesses, we’ve experienced supply chain issues and steep cost increases for some of our basic equipment. Because we are a not-for-profit cooperative, some of these expenses must be passed on to our members. I should note that the fixed monthly charge is the same for all residential members, and the costs are shared equally across the membership. 

Another component of your monthly bill is the energy/kWh charge, which covers how much energy you consume. You’ve likely noticed 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. Regardless, energy consumption is an area that you have some control over, and you can lower your monthly bill by actively reducing energy use. To help keep energy costs down, we encourage you to delay using appliances, such as washers and dryers, dishwashers and pool pumps, until after our peak and most expensive times of the week, from 5-8 p.m. Monday through Friday. Wholesale energy prices soar during this three-hour window – a cost we have to pass on to you, the consumer.

The last component of your bill is the PCA, which is the same amount for all co-op members. The PCA changes based on increases in wholesale energy prices, which means the power that Noble REMC purchases from our power provider is more expensive. The PCA covers these energy cost fluctuations without having to continually restructure electricity rates.  

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 wholesale energy and materials, please know Noble 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.