Rate increase takes effect October 1st

Rate increase takes effect October 1st

Post Date: Sep 07 2016

Rate increases needed in the co-op family

It’s rare to see demand for electricity decrease, but that is exactly what has been happening at several cooperatives including Verendrye, which, along with other factors, is forcing the cooperative family to increase rates and cut costs.

Basin Electric Power Cooperative, our power supplier, has increased our wholesale rates by about 13 percent effective August 1 of this year. Our power costs are about 72 percent of our total costs, which makes the increase impossible to absorb.  Instead of one large double digit retail rate increase we are planning to adjust our retail rates over the next two years.  Fortunately the VEC board has done some advanced planning that allows us to use revenue deferral dollars and adjust retail rates at a slower pace than wholesale rates. We are increasing rates in smaller steps based on feedback we’ve received from our Member Advisory Committee during past rate increases.

Starting with October 1, 2016 usage, which you will see on your November bill, we will be increasing our retail rate an average of 6.7 percent. Your exact increase can vary slightly from the 6.7 percent depending on your rate class and, in the case of some accounts, your load factor.  A little bit of good news for those members that heat with electricity is that our electric heating energy charge will not be increasing this year.

Reasons for rate increase

Basin is calling the conditions a “perfect storm.” The cooperative sold less electricity than anticipated to their 138 members because of a very mild winter and less demand for grain drying and irrigation. Surplus sales to non-members were also down. Revenue from Basin’s Dakota Gasification Co. (DGC), a non-electric subsidiary of Basin, lagged because of historically low natural gas prices and reduced sales of anhydrous ammonia. Historically, revenues from DGC have helped Basin keep rates lower.

This is all happening at the same time Basin is making necessary upgrades in generation and transmission in western North Dakota and is spending more for additional environmental controls required by the EPA. Keep in mind that even more environmental mandates could be coming if the Clean Power Plan survives a court challenge.

A warm winter, less demand for grain drying, and a general slowdown of the economy has also affected our sales.  With half the year over, we’ve connected around 35 new meters compared to 500 total in 2015.  Our projected year end 2016 sales will be less than our sales in 2014. 

The good news is that our cooperative is more diverse than most cooperatives. We have an almost even mix of residential, rural, industrial and commercial accounts, and serving the Minot Air Force Base all helps give us some stability.  Unfortunately this is not enough to offset a thirteen percent wholesale power cost increase.

Controlling costs

Basin is owned by Verendrye Electric and 137 other electric cooperatives that depend on it for dependable and affordable electricity. That’s why Basin has been doing its part by cutting costs. They took $100 million out of their 2016 budget with a hiring and wage freeze, direct budget cuts and by delaying projects.

We have also reduced costs by eliminating a position and restructuring the Member Services and Business departments. Over the years, we’ve gained efficiencies in billing and collections by getting more people to sign up for electronic billing through SmartHub, and we implemented a Prepay program this year as a way to cut down on delinquent accounts. Our use of technology has allowed us to save members money in other ways, including responding to outages more efficiently. 

We will continue to look at ways to reduce expenses and control cost. Look for more information about the retail rate increase in your in your September and October’s energy bill.  In the meantime, if you have any questions please feel free to stop in our Velva or Minot offices or call us.
 
Randy Hauck
General Manager