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Rising cost of fuel and materials will increase power cost

Due to rising fuel costs to generate power and overall increases in expenses, Clay Electric Cooperative will implement an increase in its rates, beginning with December billing cycles. Members using the industry household average of 1,000 kWh of power will pay $115.90, a $4 increase. The previous cost was $111.90 and took effect in January 2021.

The additional amount each member pays each month will vary based on how much electricity is used.

The change, which was to take place in November but was delayed due to billing system issues, marks the first increase higher than the rate set in 2018. The rate was $112.90 for all of 2018 and 2019. In 2020, the co-op lowered the cost of power three times, for an average cost of power for the year of $109.56.

The higher cost will be reflected in the Power Cost Adjustment (PCA) on members’ power bills.

The PCA is increasing as a result of higher fuel prices, which is making the power the co-op purchases from its wholesale power provider, Seminole Electric, more expensive.

Clay Electric General Manager/CEO Ricky Davis said the increase in fuel and commodity prices are projected to increase electric generation costs more than $7 million for 2021.

The price of natural gas has increased 100 percent this year.

“We work hard to maintain our costs and provide affordable electricity, but these large fuel increases to generate power make this rate change unavoidable,” Davis said. “This will be the first increase in the Power Cost Adjustment since 2018 due to historically stable coal and natural gas prices.”

The PCA is a separate line item on each Clay Electric bill statement, which reflects the increases/decreases in the co-op's cost of power. The co-op's cost of wholesale power is now more than 70 percent of Clay's total expenses, so it's critical the co-op makes sure it recovers all of its wholesale power costs in its retail sales.

When the cost of power is greater than the amount included in the base rate, the PCA is a charge. When the cost is less, the PCA is a credit.

In addition to the adjustment in the PCA, a recent rate study indicated the cooperative should increase its Access Charge to approximately $30 per month to recoup more of the fixed costs associated with building and maintaining its distribution system. The Clay Electric Board of Trustees voted to increase the Access Charge by $4 per month. The new monthly Access Charge will be $27, beginning in January, making the cost for 1,000 kWh $119.90. The Access Charge was last increased in 2018.

The Access Charge is the component of a member's bill that recovers some of the fixed costs that come directly from serving an individual member, regardless of how much electricity is used. These costs include the cost of the meter, wire and other equipment used to deliver electricity to the home or business, as well as meter reading technology and billing expenses. All utilities have some type of an access charge.

“Despite this rate increase, the cost of electricity remains a great value considering all the ways we depend on it,” Davis said. “Over the last five years, the cost of rent increased 3.4 percent; medical care increased 2.8 percent; and education increased 2.2 percent nationwide. But the cost of electricity only increased 1 percent.”

As a not-for-profit cooperative, Clay Electric members receive power at cost. At the end of each year when it's determined how much revenue exceeds total expenses, the difference is assigned to members as Capital Credits based on the amount each member was billed for electricity during the year. In 2020 alone, $24 million in Capital Credits was returned to members in two disbursements.