Today's Electrifying News...

Your Co-op Can't 'Duck' An Increase

Tony Anderson

For the first time in three and one-half years, Cherryland Electric Cooperative (CEC) will have a rate increase.

As I mentioned last month, "if it talks like a duck and walks like a duck, we will call it a duck at CEC." It is not a "rate adjustment" or a "rate shift." It is not an "up-tick due to the current economic conditions" or a "re-alignment" of our costs. It is a good, old fashioned, but small, rate increase that will affect every member of our cooperative.

To better meet our financial targets in 2009 and 2010, we need to raise our overall revenues by 2.73 percent. Member input and board discussion will take place at a public meeting on July 20.

The actual amount approved could vary, but probably not by much, as I am writing this well in advance of the final discussion and decision. We will give you the officially approved specifics of the final decision in a bill stuffer 30 days prior to the new rates going into effect. So, watch your bill statements closely.

An average residential user at CEC uses 700 kilowatt hours per month at a cost of $69.44. Under the proposed rates, this average bill will go up $2.43 per month. This is an actual increase of 3.5 percent, which is a result of the low number of kilowatt hours used and the fact that a recommendation will be made to raise the availability charge by $1 per month.

Why is the average user's bill going up 3.5 percent when overall revenues are going up only 2.73 percent? CEC has more than 33,000 different users of electricity and several different rate classes. It is difficult to report on them all in this small column. Members that use more electricity will see a lower percentage simply because they have more energy to spread the costs over. Overall, because we do have many members using more than the average home, the increase is 2.73 percent.

Why are we also proposing to raise the monthly $12 availability charge to $13? This is an ongoing effort to recover the fixed costs associated with having over $74 million invested in distribution facilities, whether or not everybody turns their lights on. If you shut everything off in your house for a month but still have a meter and transformer energized for the one time you may want to turn a light on, there is a cost involved. This cost is much higher than $13, but today the $1 increase is sufficient to move us closer to where it needs to be.

Is this increase occurring because we are now member regulated? If CEC would have remained regulated by the Michigan Public Service Commission (MPSC) and followed the required formulas under MPSC approved rate-making rules, this increase would still have occurred — earlier this year, and it would have been 3.75 percent instead of2.73 percent. As I explained in columns leading up to the board decision, member regulation was simply about saving money. This rate increase is proof of that for both you and Cherryland.

When will the rate increase take effect? If approved after member input on July 20th, members will see the increased prices on bills arriving in the mail in late August and September, depending on their specific bill cycle.

How does CEC compare to other utilities? I looked at the rates of other co-ops and investor-owned utilities as filed with the state on May 1, 2009. Our rates were less than the average for co-ops, and under the average when combining all companies.

I know rate increases are never popular and I wish I had better news. The good news, however, is on the next page (in your Country Lines Magazine). We are paying capital credits again and we have a new loan program for energy-saving measures around your home.

On this page, I just can't avoid the quacking duck that is a rate increase. We have tried to make it as lean as possible and while not happy about it, we think it is the best option available to sustain a solid financial future that will allow us to provide the reliable service everyone expects and deserves.

More Electrifying News >