Electric Rates to Change January 1, 2019
Basic Charge to increase by $3 for all rate classes; residential kWh rate to decrease (use charge)
Beginning with bills generated on or after January 1, 2019, members will see a $3 increase in the basic charge, while the residential kilowatt-hour rate will decrease for December use and thereafter. For residential members, this will result in, on average, a $2 impact to your monthly bill.
The board of directors concluded this adjustment is necessary due to forecasted lower electricity sales and needed system improvements. An increase in the basic charge (a fixed cost) with a decrease in the kilowatt-hour rate (measuring your monthly energy use) will provide financial predictability, meaning the weather will not have as much impact on your bill.
The National Oceanic and Atmospheric Administration has predicted that weather patterns for the coming year will be warmer (see adjacent map), which adds up to lower kilowatt-hour sales and smaller revenues available to the co-op to spread across system maintenance. The co-op has fixed costs it must pay and power it must buy to sell to its members. Warmer weather will result in lower energy use which means less revenue for the co-op. The result? Rates must increase to cover the costs of ensuring you have access to safe, reliable power nearly 24/7 (we can’t control Mother Nature whose storms occasionally knock out power).
There are two components to look at when considering a rate change: the use charge and the basic charge (defined on the opposite page). The lower the basic charge, the higher the use charge has to be for revenues necessary to cover the cost of the co-op’s operations. Conversely, the higher the basic charge, the lower the energy charge. Why? When the basic or “fixed” charge is set at the appropriate level, resulting revenues pay for the day-to-day costs of operating the co-op without having to “chase the weather” with energy sales—higher when it’s cold and lower when it’s warmer. Remember, the co-op has costs it has to pay whether or not it sells a single kilowatt-hour.
At the November board meeting, the board’s decision to increase rates was in response to energy use patterns declining with warmer than usual weather, as well as needed infrastructure improvements.
Lane Electric’s 2019 budget anticipates more construction, including several undergrounding projects, to improve reliability for decades to come. We borrow to finance these long-term improvements so that each generation of members pays a fair share of the cost and benefit. The change to the basic charge across all rate classes reflects all current members’ share of the improvements.
Predictability—for the co-op and for the member—is why the residential kWh rate is decreasing. A lower kWh rate for the first tier of use helps stabilize your bill when cold spells have you using more electricity to stay warm. Also, a lower rate helps Lane Electric collect only the revenue it needs to meet operational goals. The cost to deliver that energy to you across the miles is more appropriately collected in the basic charge that stays the same each month regardless of how much energy you use.
Meeting operational needs with affordable rate structures has been, and continues to be, a focus of the board of directors. The board, and all Lane Electric employees, are committed to operating efficiently to provide you with reliable electric service. We also offer energy efficiency and weatherization programs to help you reduce your energy use and decrease your monthly electric bill, while increasing the comfort levels in your home. If you are interested in more information about our conservation programs or need help paying your bill, contact us at 541-484-1151. We offer payment options and financial assistance for those households at or below 60 percent of Oregon’s median income.
Detailed rate schedules and sample billings are available at our Rate page.
Examples of Monthly Effect on RESIDENTIAL Electric Bills (Including Basic Charge)
|Time of Year||Monthly Use kWh||2018 Rates||2019 Rates||Dollar Difference||Percent Difference|
What is a Basic Charge?
Whether you use one kWh, 100 kWh, or 1,000 kWh of electricity, there are certain expenses that remain the same to bring power to your home or business. These are called fixed costs. Fixed costs do not vary based on the amount of electricity consumed. They include taxes, poles, wires, equipment, trucks, labor and billing systems, all of which must be in place to make sure members receive safe, reliable electric service.
To make sure the recovery of these fixed costs is not solely dependent on kilowatt-hours sold, members’ bills include a basic charge to augment the energy or kWh charge.
With January bills, the residential basic charge will increase from $28.50 to $31.50. All other rate classes will also see a basic charge increase of $3.
How Rate Decisions Are Made
The responsibility for changes in Lane Electric Cooperative’s rates resides with the board of directors. Members elect directors to represent the best interests of the entire co-op membership. In accordance with the cooperative’s Articles of Incorporation, rate-making is one of their major responsibilities.
At the direction of the board, cooperative staff develop several alternative rate schedules and provide the impacts each rate schedule would have on a member’s bill at varying levels of electricity use. The board evaluates the alternatives for affordability, fairness to all concerned, incentivizing energy efficiency, and aligning the cooperative’s cost structure to the rate structure, among other considerations.
IMPORTANT NOTE: The rate change taking effect will show on your January electric bill, which is based on your energy use during December.
A Simple Look at Fixed Costs and Use Costs and How They Impact Us
Fixed Cost Analogy …
Substations, trucks, poles, wires, transformers, meters, etc., (the co-op’s property) and personnel are referred to as “plant.” The co-op finances its plant over 30 years and must make monthly payments whether or not a single kWh is sold. These are “fixed costs.”
Generally, vehicles (your property, or “plant”) are financed over extended periods of time like the co-op’s plant. Monthly payments must be made to the lending institution whether or not the car is driven a single mile. Your monthly car payment is a “fixed cost,” just like the co-op’s fixed costs.
Whether a complex electric distribution system, or a passenger car for transportation, there are fixed costs for having both in place and available for use at any time.
Then There’s The Use Costs …
The basic charge pays for the co-op’s infrastructure (fixed costs) so you can have electricity at your home 24/7 whether you use any or not. Your appliances then use energy (kilowatt-hours) that are delivered to your home over the electric system. You are charged for the kWhs your appliances use and will see this charge on your electric bill.
Similarly, your car payment provides you with a vehicle (infrastructure) so you can come and go 24/7, if you choose. When you elect to use your car, the other costs begin to mount, adding to your total car expenses for the month. Simply put, the more you drive, the higher your monthly car expense—just like your electric bill. It’s the same principle.
TVs, ovens, microwaves, electric heat, lights, refrigeration, air conditioning … they all add up!
Maintenance, fuel, oil, repair bills, tires, insurance … they all add up!