Associated Electric Cooperative, the power supplier of Missouri Electric Cooperatives, has announced that rates will be going up in 2016, probably April 1st.
As a result, Howard Electric will raise rates in April to cover Associated’s increases as well as other increases that HEC has seen, including the cost of a much needed third substation. This new substation will be located in the southwest portion of our service area and will allow us to better serve existing members and new loads.
A cost of service study is being done by our consulting engineers to determine what the new rates will need to be.
One component of the new rates will be a demand charge which gives members an opportunity to shave peak and have more control over your bill. The initial demand charges in 2016 will be very small and over time, we will raise the demand charge and lower the kWh charge. So, here are some possible questions you might have regarding demand rates.
DEMAND CHARGE - COULD YOU GIVE ME AN EXAMPLE OF WHY A DEMAND CHARGE IS NEEDED?
If all the members combined on the hottest day needed 100,000 kW, then the utility has to build a plant to cover that demand for the hottest day. So let’s say that plant costs $150 million to build.
Now, let’s say you’ve got a large business that always uses 100 kW. So theoretically, you would need to pay for 100/100,000ths of that plant. The 1/1,000th of a $150,000,000 is $150,000. Hopefully, (barring environmental obsolescence) that plant will last 50 years and you make payments once a month, so $150,000 ÷ 50 years ÷ 12 months is $250 a month for demand charges for your large business. Now, you’ve paid your share of the plant but you haven’t paid for the coal or the natural gas that went through the plant. Those costs are recouped in a kWh charge.
HOW HAS DEMAND BEEN PAID FOR IN THE PAST?
Historically, members have always paid for the demand incurred by the cooperative through the kWh charge, but now we can begin to shift demand costs to an itemized lines on the bill so that you can decide if you want to shave your demand by changing the times you do household chores.
For some it may be worth the effort and others, the demand will be so low, it won’t be worth the bother. However, over time the demand should rise and the kWh rate should come down.
WHY THE CHANGE TO RESIDENTIAL DEMAND RATES?
Until recently, residential electricity loads were pretty much the same from one member to the next. We all (more or less) woke up, took a shower, went to work, came home, turned on the lights, cooked dinner, watched TV, did a load of laundry, and went to bed.
Today this assumption is no longer true. Not all residential customers are the same. We now have access to LED lights, smart thermostats, plug-in electric vehicles, rooftop solar, demand-flexible water heaters, battery energy storage and a myriad of other technologies that make our respective loads and our consumption patterns potentially very different.