Sumner-Cowley Electric Cooperative rates can’t be fairly compared to those of the City of Wellington

first_imgEditor’s note: The following was a letter that was sent out to the members of Sumner-Cowley Electric Cooperative from Clete Rains, CEO. We have decided to reprint it here.Lately there has been a lot of information in the news concerning the electric rate increase recently implemented by the City of Wellington.  The purpose of this article is to clarify some of the information, much of which is incorrect and incomplete, that has made it into the public conversation where a comparison of the city’s rates is being made to our rates.I want to assure our members that at this time we have no plans to increase our electric rates at Sumner-Cowley Electric.  The most recent increase in the kWh rate came in 1995. In 2004, we did increase the facilities charge from $12 per month to $18.75 per month and, in 2008, implemented the Energy Cost Adjustment (ECA).  Prior to implementation of the ECA in 2008 we did have a fuel adjustment charge which was discontinued in the late 1990s after the kWh increase was implemented.The City of Wellington is increasing their meter charge (which Sumner-Cowley identifies as a facilities charge on our billing) from $10 to $17.50 per month for a standard residential account.  Our facilities charge for this same classification is $18.75 per month.  The city is increasing their electric kWh rate to 5.8 cents per kWh.  Sumner-Cowley’s rate is 10.737 cents per kWh.  Both the City and Sumner-Cowley have a monthly ECA which is added to the kWh rate.The City’s ECA can vary significantly from month-to-month and has averaged somewhere around 7 cents per kWh, but has been as high as 9 cents per kWh.  Sumner-Cowley uses a rolling 12 month average ECA to level out the monthly variances which results in an average of approximately 3 to 4 cents per kWh.  Each month I compare the City’s electric bill to Sumner-Cowley’s and Sumner-Cowley is generally higher with a range of approximately $4 to as much as $25.00 per month depending on the time of year.  With the City of Wellington’s new rates the variance between their rate and Sumner-Cowley’s will become much smaller and, at times, Sumner- Cowley’s may be lower when viewed in comparison.I want to point out that when these types of comparisons are made you need to be aware that there are significant differences between a municipal electric system, such as the City of Wellington, and a rural electric cooperative.  Although we are both not-for-profit public power utilities, our electric systems are very different and that affects how rates are developed.  One difference is the fact that Sumner-Cowley returns our members’ investment in the utility by way of capital credits or patronage capital.  What this means is that all the financial resources that exceed the total actual costs of operating the cooperative are returned to our members.This is done initially by allocating these funds to those members that contributed to the operation of the cooperative through their electric rates.  We then return the funds to the members through a process called retirement which is accomplished either by check or billing credits which lower your electric bill for the month the retirement takes place.  The City does not have such a process and instead uses the excess revenue to fund other areas of the City government.  If you consider the application of the patronage capital, when compared to the City’s billing, your electric bills are very close to or lower than the City’s overall billing.  For example, in 2014 we returned over $300,000 in patronage capital to our members plus an additional $567,815 in credits we received from our power supplier totaling over $867,815 returned to our members through bill credits or checks.Another consideration is the size and scope of our electric systems.  The two entities serve approximately the same number of meters, however Sumner-Cowley has approximately 2,000 miles of distribution power lines, 43 miles of transmission lines, 17 miles of underground power lines, 12 substations and two distribution delivery points we own and operate within a 2,400 square mile area.  The City, in comparison, has approximately 150 miles of distribution lines which includes about 100 miles of power lines outside the City Limits, three miles of transmission, two power plants (which are rarely used) and one substation located at the main power plant.  Sumner-Cowley owns one power plant which is a one megawatt peak shaving generator used to lower our peak demand and will save us over $100,000 per year in purchased power costs, a direct benefit to our members.We have a density ratio (a calculation of number of meters served per mile of distribution power lines) of about 2.25 meters per mile whereas the City has approximately 29 meters per mile of power lines.  What this ratio illustrates is that the City derives revenue from 29 meters for every mile of power line while Sumner-Cowley receives revenue from 2 meters per mile.  We both pay approximately the same cost to build the line but our expense for maintaining and operating our system is higher and we receive less revenue.One such expense we have within our operating costs is the taxes we pay.  We pay all applicable taxes except income taxes because we are a not-for-profit cooperative.  The City is exempt from taxes since they are considered a government entity and actually impose taxes upon Sumner-Cowley Electric.  We pay over $400,000 per year in property taxes of which over $250,000 goes to Sumner County and $60,000 to the City of Wellington.  This amounts to approximately 1 cent per kWh we have to include in our rate just to pay our taxes.While these are just a few of the differences between Sumner-Cowley Electric and the City of Wellington, and there are many more, they provide insight into how it is unfair to make a rate comparison between Sumner-Cowley Electric and the City, though Sumner-Cowley’s basic rate is still very comparable to the City’s and will be much more so once they implement their new rate structures.  Simply looking at the basic electric rate without offering consideration to certain factors provides an incomplete perspective which misrepresents Sumner-Cowley Electric Cooperative.Follow us on Twitter. 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Thank you for your input. +5 Vote up Vote down Doug · 251 weeks ago I have been a member of REC for 30 + years and have always commented we had the highest price electricity around. I think this is an excellent article and it shows that indeed, REC is and will be higher than city of Wellington power rates. The city is just trying to play catch up so they can afford to keep up the system they have. True enough, REC hasn’t raised the per kilowatt rate but they have added and raised other charges. Bottom line….. the cost to the consumer has gone up since 1995. Report Reply 5 replies · active 251 weeks ago +5 Vote up Vote down Jim · 251 weeks ago Doug, you are correct this is an excellent article, which also explains why REA electricity will always cost more, but it is worth it comparison to the alternative…. No electricity. The cities are not willing to make the investment like a Cooperative in bringing power to rural farms. Report Reply +9 Vote up Vote down Anne · 251 weeks ago The only charge that has been added my bills at REC is the PCA. ALL utilities have added this to their bills. Bottom line….what is something that you can name that hasn’t gone up in cost in the last 20 years. Groceries, gas, clothing, housing have all increased. Report Reply +4 Vote up Vote down Cletas Rains · 251 weeks ago Doug, as I stated in my article, S.C.E. did raise the monthly minimum from $12.00 to $18.75 for residential accounts in 2004. In 2008, we re-implemented the ECA, which we had discontinued in 1995 when we last raised the kWh rate. These are the only changes in our rates that have occurred since the kWh increase in 1995. I compare my City electric bill every month with S.C.E.’s and when I applied the City’s new rate to my August billing, the difference was $7.78 for the month. I agree this is still $7.78 higher than it would be under the City’s new rate, but remember, we pay property taxes and the City does not. If we were under the same rules as the City, the $7.78 higher variance would actually be approximately $11.00 lower in comparison to the City’s billing resulting in a $4.00 lower billing under S.C.E.’s rates. In addition, as I understand the City’s new rate structure, there will be an automatic 2.25% increase every year for the next four years. I cannot say with all certainty that S.C.E. will not raise rates over the next four years, but we currently have no plans to do so and this will definitely close the gap between the City and S.C.E. Report Reply +2 Vote up Vote down Doug · 251 weeks ago Cletas, understood. The majority of my point was that consumers of electricity on the city of Wellington grid should not be overly upset. They will still be consuming less expensive power. Thanks for such good service by REC and for your personal leadership Report Reply +1 Vote up Vote down Cletas Rains · 251 weeks ago Thank you Doug. Having members like you is what makes my job enjoyable. Report Reply +7 Vote up Vote down Ray · 251 weeks ago Once again when we had a utilities director opening why did we not seek someone with the knowledge of Mr. Rains instead of promoting a former fireman with limited I.T. skills to Utility Director. In times of increased rates would it not be prudent to have a person with expertise running these departments. Just asking how the city doesn’t even advertise a position and expect to get the best. Report Reply 0 replies · active 251 weeks ago Post a new comment Enter text right here! Comment as a Guest, or login: Login to IntenseDebate Login to WordPress.com Login to Twitter Go back Tweet this comment Connected as (Logout) Email (optional) Not displayed publicly. Name Email Website (optional) Displayed next to your comments. Not displayed publicly. If you have a website, link to it here. Posting anonymously. Tweet this comment Submit Comment Subscribe to None Replies All new comments Comments by IntenseDebate Enter text right here! 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