No Rate Increase for 2018
According to the U.S. Bureau of Labor Statistics, electricity continues to be a good value. On average, the cost of electricity rises at a slower pace than many other necessary household expenses. For example, from 2011-2016, the average annual price increase of education was 3.4%; rent saw a 3.3% increase; and medical expenses came in at a 3% hike nationwide. However, electricity only experienced a 1% annual average increase over the same period.
Morgan County Rural Electric Association is committed to keeping that trend of affordability going. For the second straight year, I’m proud to announce that Morgan County REA will not be imposing a rate increase to our members. The MCREA Board of Directors made the decision to not raise electric service rates for 2018 at their September meeting.
One of the larger contributing factors for the decision to not raise rates came from Tri-State Generation and Transmission’s announcement that they will not be increasing MCREA’s cost of purchasing wholesale power next year. I’ve discussed what ‘wholesale power’ means in past articles, but in this context, I think it’s a good idea to review it again.
Morgan County REA does not own power plants to generate electricity. Tri-State G&T creates our electricity from their power plants and other resources, and sends that electricity to our substations. From there, Morgan County REA’s infrastructure steps down the intensity of the raw electricity and sends it along our distribution system to your homes and businesses. Tri-State charges MCREA to provide and transmit the power to our system, and we in turn charge our members to cover Tri-State’s ‘purchased power’ cost along with the overhead incurred to distribute that power to you. Incidentally, that ‘purchased power’ cost is by far our largest expense, and represented nearly three-quarters (72.8%) of Morgan County REA’s total expenditures last year.
Generally speaking, an increase in wholesale power costs could ultimately result in MCREA passing-through those increases to our members. The announcement of no wholesale power increase, along with the results of an independent cost-of-service study, allowed the board of directors to make the determination to not raise rates to our members. We commend Tri-State for working hard this year on cutting internal costs and for their rate stabilization efforts.
As I mentioned above, another component in MCREA’s board decision to not raise rates came from an independent cost-of-service study conducted earlier this year. So, what is a cost-of-service study and why is it important to our cooperative?
Simply put, a cost-of-service study analyzes what it will cost to provide electric service to our membership, and makes recommendations to MCREA’s board and management staff for the following year. Morgan County REA utilizes an independent third-party to conduct the cost-of-service study to ensure impartiality and transparency.
The study is a valuable tool which helps MCREA in making decisions to meet financial goals and objectives. Since we’re a member-owned, not-for-profit cooperative, we don’t raise rates to generate profits. We raise rates - when necessary - to cover the cost of doing business and meet regulatory requirements.
The recommendation from the rate specialist who conducted this year’s cost-of-service study was to not impose a rate increase to Morgan County REA’s members in 2018, citing Tri-State’s decision to keep wholesale power costs steady and MCREA’s continued efficient operation.
I’d like to thank Morgan County REA’s Board of Directors, staff and employees for their hard work and dedication to our cooperative. The MCREA team – Operations, Engineering, Office Services, Human Resources, and Member Services – and their ongoing commitment to the integrity of Morgan County REA continues to be a huge contributing factor to the success of your cooperative. It simply comes down to our people making a difference – every day.
Finally, on behalf of everyone at Morgan County REA, we wish you a very Happy Thanksgiving, and we’re looking forward to providing you safe, reliable energy with a strong tradition and vision for the future. That’s our mission.