“Buckeye Rural Electric Cooperative has the highest rates in the state!”
We hear this refrain often, but it simply is not true. A recent rate comparison shows that our members’ end-use bills actually declined somewhat over the past year.
BREC’s electric rates, when compared with those of American Electric Power in Southeast Ohio, are higher. But the comparison is between a giant for-profit, investor-owned corporation and a small, very rural electric cooperative.
And, AEP’s rates are going up. Customers of the IOU face a series of PUCO-approved rate hikes. In addition, the company has announced that it will seek riders and add-ons necessary to fund construction of a new coal-burning power plant. We point this out not to be critical, but to demonstrate that this is a period of rate volatility in the Buckeye State.
Even when comparing BREC with other electric cooperatives in Ohio, we have never had the highest rates. Our distribution rates were last adjusted in 2003, the same year we experienced a peak of record that caused our wholesale demand costs to sky-rocket. It was also the year when BREC’s old transmission contract expired, and we had to renegotiate a new transmission agreement with a much higher price tag.
All these factors contributed to a case of “sticker shock” in late 2003 when the wholesale power cost adjustment line item on members’ bills shot up. The distribution rate (the portion of electric revenue that we use to fund operations and pay long-term debt) remained a lesser component of the overall end-use total, but what members noticed – and what mattered to them economically – was that they were paying more.
No one likes to pay more for goods or services, especially if they don’t believe they are getting value and reliability in return. We listened to members’ comments and discussed ways to better control power costs while continuing our mission of improving service.
Subsequently, BREC was able to avoid setting a coincidental peak when the statewide generation and transmission cooperative, Buckeye Power, Inc., hit a new winter demand record last December. This lowered our demand rate, although we didn’t get back to where we were before the 2003 peak of record (POR).
Another positive development is the revised wholesale rate structure adopted by Buckeye Power. A new formula for calculating demand takes into account both the peak of record and a 12-month average of peaks. At this time, we are waiting for confirmation of our summer POR before crunching numbers to see where we stand, but we’re optimistic that the new rate structure will be beneficial to residential consumers.
In the meantime, Buckeye Power, our wholesale supplier, has released its latest statistical reports about Ohio’s 25 rural electric cooperatives. Goods news is that BREC improved in a comparison of end-use winter rates (generation, transmission, and distribution costs) over the past two heating seasons.
During the winter of 2003-2004, BREC’s winter rate for 1,000 kilowatt hours/month was 10.76 cents per kwh. The winter rate decreased to 9.46 cents per kwh for the winter of 2004-2005.
Several in-state electric distribution utilities had higher winter rates last season, including three IOUs: Cleveland Electric Illumination, Ohio Edison, and Toldeo Edison. BREC definitely is not the owner of the title for highest rates.
Everyone in the utility business is concerned about what drives electric rates. On the wholesale side, the factors are environmental regulation and the need for more generating capacity. Among distribution utilities such as BREC, the drivers include operating costs (labor and benefits, fuel, supplies), system improvements (new lines and substations), system maintenance (rights-of-way clearing), and interest expense (debt accrued to finance construction of new facilities).
Several years ago, the BREC Board of Trustees assigned a priority to improving reliability of electric service. Construction of new, heavier lines and substations, interconnection of circuits to provide “loop feeds,” and aggressive vegetation management continue to be the main cost generators for BREC. I don’t see these drivers changing in the short term, although we are subject to the same economic pressures of any business. Fuel costs, for example, have gone sky high this year, but the same strain is affecting everyone’s budget and wallet.
While BREC would like to reduce electric rates, it would be at the expense of reliability. Our goal, therefore, is to control rates and try to keep them as stable as possible without sacrificing our commitment to improving electric service. This means slight adjustments might be necessary from time-to-time as we respond to market and industry conditions.
We will be looking at our rate structure and projecting revenue-versus-cost ratios on a regular basis in order to react quickly to power market pressures and fluctuations.
Buckeye Rates