Rate Restructure & Bill Changes
Sangre de Cristo Electric Association (SDCEA), a not-for-profit electric cooperative, strives to provide reliable, safe power, control costs, and charge the fairest rates possible to our consumers. We mentioned in our December edition that the cost-of-service study conducted by the cooperative over the past 18 months found that SDCEA does not need to enact a general rate increase. Notably, we have not increased rates since 2017.
Through the cost of service study, we also learned SDCEA has not adequately recovered our fixed costs (the expenses covered in the service availability charge) since our last rate increase. As experienced by many businesses in recent years, the costs to SDCEA in this category have increased significantly. Reviewing the study, SDCEA determined it is necessary to rebalance these costs and restructure our rates in 2022.
When you purchase a product, the receipt generally shows the total price you paid for your item and perhaps the taxes on that item, if applicable. The receipt generally does not show things that factor into the price of the item, such as labor cost, shipping, property taxes, accounting cost, manufacturing, and delivery, but those are things that also factor into the price you pay for that item.
Energy is like any other purchase you make — there are components that contribute to the price you pay for it. Energy is also unique in that you cannot simply go to the store and pick some up for your consumption. It must be delivered via a highly developed and costly framework: the electric grid.
Unlike the receipt for many of the purchases you make, SDCEA is going to unbundle — show the components of our cost breakdown of — your electric bill, beginning in February. We hope that in doing so, consumers will have a better understanding of the cost components that go into the total cost of energy delivery to your home.
SDCEA’s former energy charge will now be divided into two parts — the actual energy consumed and the cost of distribution and delivery of that energy to your home.
The distribution charge is the cost of delivery of energy. Similar to variances in shipping rates for various products and how those products are delivered, some distribution charges will vary in specific rate classes due to the size of the consumer’s service, how much energy the consumer uses, or when energy is used.
The cost of distribution was previously included in the total energy rate SDCEA charged. With the change in our rate structure, the sum of these two charges, the cost of energy plus distribution, which previously equaled roughly 13 cents per kilowatt-hour (kWh), will now be reduced to 10.5 cents per kWh.
The service availability charge reflects the fixed costs incurred to connect each consumer to the electric grid, whether that consumer uses a lot of energy or not very much. This includes operation and maintenance costs, as well as financial costs. This charge is intended to recover the cost of owning, operating, and maintaining the infrastructure (such as power lines, transformers, equipment, and buildings) necessary to connect your home or business to the grid. This charge also includes financial, administrative, and staffing costs.
The cost-of-service study identified that the former service availability charge was not collecting enough revenue to pay for the fixed costs associated with having and providing service to each member. Specifically, these costs have been subsidized by revenue received through SDCEA’s former energy charge. The disparity in paying for these fixed costs through the energy charge is that members who use and pay for more energy subsidize the costs to provide service to members who use and pay for less energy. SDCEA’s goal is to distribute those costs fairly among ratepayers.
To pay for the actual costs covered by the service availability charge, the cost-of-service study showed that the monthly service availability charge needed to be increased from $31.83 to $46.15.
While the new service availability charge is an increase from what consumers paid previously, consumers who use about 590 kWh’s or more will see no increase, and likely a decrease in their overall bill. Those who use less than 590 kWh’s a month will see an overall increase in their bill.
It is our aim through restructuring and itemizing our charges, we may more fairly recover costs from those who use our system. We also hope that our consumers have a better understanding of the cost components of their monthly bill.