Separating Energy and Operating Costs is the Co-op Way
De-coupled costs bring fairness to members’ bills
Lane Electric’s billing system was born in the days when it was standard practice for electric utilities to bundle all costs of service into the kilowatt-hour charge. It was a simple and convenient way for both utilities and their customers to do business.
However, this also fueled members’ perceptions that everything the utility provided them was defined solely by how much electricity they bought. When their use went up, so did the dollar amount of their bill. The trouble is, utilities’ operating costs do not rise and fall the same way.
Separating the operating costs of bringing electricity to members from the costs of the energy itself means each member pays their fair and equitable share of both. The adopted rate change taking place in April places more of our fixed costs into the basic charge rather than in the kWh energy charge.
Why the Change?
Several changing factors affect costs. Weather patterns have become more volatile since the 1990s, creating erratic energy use. Weather patterns also affect how much of our region’s electricity is produced at hydroelectric dams, introducing more volatility to prices on the wholesale energy market.
By recovering the co-op’s fixed costs in the kWh charge, we run the risk of not meeting our budget for the year if a warm winter keeps projected power sales low. If the winter weather turns out to be colder than predicted, we run the risk of collecting too much from members. Removing unpredictable factors such as weather for cost recovery is a wise business practice.
If members want to reduce their energy use through home improvements, efficient appliances, or self-generation with solar, wind or thermal technologies, we are here to offer support and programs to help. But even if we all consume less energy, we all still need the power grid, which costs money to operate and maintain.
In the past 17 years, the Lane Electric basic charge has been adjusted six times until reaching the $28.50 effective in April. Please note the basic charge remained flat in the nine years between 2002 and 2011.
As more of the utility’s fixed costs shift to the basic charge, you will more accurately see what portions of your bill are fixed cost items, such as system maintenance, billing costs, and the cost of keeping your personal information cybersecure, and what portion is the actual energy charge, as shown in your kWh cost. You will know more about what you are paying for.
All Rate Classifications Affected
This article focuses on our residential members, but the redesign has affected all membership service categories. Each has its own unique electric service charges depending on when and how much electricity is used. Detailed information on each rate class’ basic charge is available on our website, www. laneelectric.com. Go to the Rates & Fees tab, then drop down to Rates.
The Electric Utility Industry is Not Alone
- Membership stores charge an annual membership fee that allows the shopper to access discounts whether they buy $100 or $100,000 in goods that year.
- Gyms charge a basic membership fee no matter how many times the holder uses the equipment in a month.
- Cable television and movie streaming services charge a monthly fee that allows the subscriber access to the service whenever desired.
These basic charges, like your utility basic charge, allow the company to recover the cost of having their goods and services available to you when you need them.