MESSAGE FROM THE GENERAL MANAGER
Rollie Miller
Wholesale Rates from Bonneville Power Administration (BPA)
First, we have an all-requirements wholesale power contract with BPA that extends to September 30, 2028, and every two years BPA completes a “rate case” to determine wholesale rates for the two-year period. We have what are called tiered rates in our contract with BPA. We have Tier 1 rates that are mostly stable and tied directly to the operation and management of the generation sources, most of which are hydropower. The Tier 2 rates are for the most part market-based rates and can fluctuate based on the open market for power. In 2017 we outgrew our Tier 1 requirements and now approximately 20% of our wholesale power purchases are in the Tier 2 category. Now for some bad news. We were officially informed in August that our wholesale rates would be going up substantially. Our Tier 1 rates are staying flat. The Tier 2 rates, however, are almost doubling. This equates to an 18% increase in our total wholesale power costs over last year, excluding the BPA distribution credit received, creating a shortfall in our necessary revenue to remain compliant with our lending partners. Not very good news.
Retail Rates for 2024
On the retail side of things, after very thoughtful and lengthy deliberations with management, staff and the board, the following rate increase was approved by the VEC board of trustees at its October board meeting. This rate increase will be an overall total increase of approximately 13.8% for the residential and small commercial rate classes, with an effective date of January 1, 2024. On the residential side we are implementing a three-part rate which has been a trend in the electric cooperative industry for years. We have billed the kW demand component on the irrigation and small commercial rates for years and, although we have had the kW demand line item on your residential rate schedule monthly bills for years, it has been multiplied by $0 meaning no charge. We are a few years behind in implementing the full three-part rate on the residential rate, which includes the kW demand. Those three parts are: 1) a base charge that will remain the same in 2024 at $28 per month. This is to recover most of the costs to keep the service in place and maintained at your location; 2) a new kW demand component charged at $1/kW for each kW used. This is a charge for the rate at which you are using power. A typical home uses less than 10 kW demand per month; and.3) the kWh energy charge component, which will be billed at the new rate of $0.0631/kWh. The previous amount charged was $0.0581/kWh.
On the irrigation rate schedule side of things, the annual HP charge billed in January will remain the same at $12.50/HP. The monthly kW demand will also remain the same at $2.45/kW demand. The energy charge or kWh charge, however, will increase from $0.049/kWh to $0.060/kWh. Although most of the irrigation accounts are shut off during the winter, there are some that operate year-round. We will bill those accounts with usage monthly in the winter “off-season” months. This new irrigation rate change will be implemented April 1, 2024.
On the small commercial rate schedule, the kW demand component will stay the same at $3.50/kW demand. The energy charge will increase from $0.04981/kWh to $0.06081/kWh. The minimum monthly billing amount will increase to $40/month.
As I stated, not very good news at all. We are, however, simply recovering our wholesale cost increase component. This is a straightforward pass-through of our wholesale rate increases. Even with the upward pressure on most if not all the other costs (fuel, line materials and trucks) we are seeing, we have had enough growth in memberships to offset most of those other cost increases.
My Retirement
After what will be 44.5 years of serving in this industry, I have notified the board of trustees and the employees that I am planning to retire next spring. The board has hired Great Coops to facilitate the recruitment and hiring of my replacement. The cooperative is in great shape in almost every way, from a financial standpoint to the staff working for you. I am very proud of the staff and board for allowing me to lead such a great organization. I do not know of one better than this one. I am not leaving just yet, but I wanted to share my retirement news with the membership and although the news in this newsletter is relatively bad, I will continue to write these articles until my retirement and continue to work for you in ensuring the future success of the organization. Even after this rate increase, I am expecting our retail rates to be some of, if not the, lowest in the state and country. I hope you have a Merry Christmas and a joyous holiday season. If you need to contact me, please feel free to call me here at the office, on my mobile (406) 925-1085 or email me at rollie@vec.coop.
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