Rate Increase 2010

From Manager / CEO Rick D. Gerdeman

Midwest Electric will increase electric rates this August, our first retail rate change since 2006. Overall, this will be an 8 percent increase over our current rates, meaning an 8 percent increase in revenues to the cooperative. As this is our first retail rate change since 2006, that is the equivalent of a 2 percent annual revenue increase from 2006 to 2010.

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Q & A - Frequently Asked Questions

 

Current Standard Residential Rate
$20/month Service Charge
$0.0915 per kWh

New Standard Residential Rate
$35/month Service Charge
$0.09061 per kWh

Current Reduced Rate (Heat Pumps & Geothermal)
$20/ month Service Charge
1st 750 kWh @ $0.0915 per kWh
Next 2,000 kWh @ $0.0765 per kWh
All remaining kWh @ $0.0915 per kwh
This rate is effective 8 months of the year, October through May. From June to September, it’s the standard rate, $0.0915 per kWh. Plus $1 per month credit for the water heater control switch.

New Reduced Rate (Heat Pumps & Geothermal)
$35/month Service Charge
1st 750 kWh @ $0.09061 per kWh
Next 2,000 kWh @ $0.08061 per kWh
All remaining kWh @ $0.09061 per kwh
This rate is effective 8 months of the year, October through May. From June to September, it’s the standard rate, $0.09061 per kWh. Plus $1 per month credit for the water heater control switch.

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The average residential member, using 1,500 kilowatt hours (kWh) per month, will see just under an 8 percent increase. Lower-use members will see a greater percentage cost increase, and higher-use residential members will see a lesser impact on their monthly bill.

That effect is due to the increase of our flat monthly service charge. This fee is currently $20 and will be increased to $35 per month for all members. The service charge (which is not shown as a separate item on your bill but rather is rolled into your “Energy Charge”) covers the cooperative’s fixed costs. This includes the costs of the meter, wires, poles, transformer, depreciation, distribution and generation capacity, and other items needed to provide the electricity on demand, as well as fixed costs for billing, member services, administrative, tree trimming and line maintenance. These costs exist whether a single kWh is used or not; the cooperative incurs these costs regardless of the level of energy use.

But while our monthly service charge is increasing, our kWh charge is decreasing. Currently, our kWh charge averages about 9.15 cents per kWh, and will be 9.06 cents per kWh under the new residential rate. So the result is high-use members will see less of an impact because they’re spreading more kWh (at a lower rate) over the higher service charge.

We’ll also continue a discounted electric rate for members who have a heat pump or geothermal system and an electric water heater with our load control switch. This rate will feature a slightly higher summer rate (4 months), and a discounted winter rate (8 months); and will save a typical member about $50 per year compared to the standard residential rate (in addition to the savings from having a more efficient heating system).

We’re also contacting our commercial members separately with information about their new rates.

We understand these are tight times and any cost increase can be difficult to absorb in your family budget. As a not-for-profit, customer-owned cooperative we don’t have to collect excess profits to satisfy far-away owners. Rather, you are the owner, and our rates are designed to only collect what it costs to provide the service plus a small margin. This margin helps maintain customer-equity in the cooperative and lower our borrowing costs, and it is used to invest in new substations, poles, lines and other electric infrastructure capital items.

We cut $2 million out of our 2010 budget (compared to the 2009 budget) and we regularly review ideas - big and small - to operate even more efficiently.

Cost of service study shows need for rate change