Average bill to rise moderately as cooperative remains among the state’s most affordable energy providers.
Facing continued rising costs in most aspects of distributing electricity, South Central Power is adjusting rates in 2024 with the goal of bringing our consumer charge more in line with associated costs. A recent third-party review of our costs and rate structures revealed that our $22 consumer charge does not fully recover the fixed costs associated with the infrastructure and administrative costs of having your power available at the flip of a switch.
The result of this adjustment will mean a $5 per month increase in the consumer charge for all residential members — an increase of about 3.6% for a member using 1,000 kilowatt-hours per month. For a breakdown of all rate changes, including commercial rate changes, visit southcentralpower.com.
Why are we making the change?
As a not-for-profit cooperative, we remain focused on reliably delivering your power at the lowest possible cost. We bill on a cost-based model, meaning our rate structure is designed only to recover our costs of purchasing power and delivering it to you and making a small margin. Electric cooperatives serve fewer meters, on average, for every mile of line compared to more urban power suppliers in densely populated areas. This means the fixed costs we must recover to deliver power are higher than some other utilities. Additionally, although a period of higher energy sales might mean more profit, any excess revenue is allocated to you, the members of the cooperative. Aligning the consumer charge more closely to the actual cost to deliver electricity puts the cooperative in a better position financially to withstand periods of lower-than-expected sales, like we have seen during the past 12 months.
So how do we fairly recover costs? Your bill has three components: a consumer charge, a distribution charge, and the generation & transmission charge. Let’s look at these components, why we bill this way, and what the rate adjustment will mean for your cooperative as a whole, and you as a consumer.
Consumer charge
The primary reason for the consumer charge is to fairly recover a portion of the cooperative’s fixed costs, or our cost to deliver power to you regardless of how much power you consume. This includes both infrastructure and administrative costs that we incur to both deliver your power and maintain the business operations required to make your power available 24/7. A careful analysis of our rates indicates that our current $22 charge is not adequate to truly recover these costs, and that some costs that are fixed are recovered through the variable distribution charge. Rate structures with overly conservative consumer charges can lead to financial instability when weather changes result in lower power sales, or an unneeded financial surplus when a particularly hot summer or cold winter results in higher-than-expected energy sales. Our upcoming consumer charge adjustment, effective April 1, 2024, will cover the increases to these rising fixed costs, which allow the cooperative to continue to invest in better service and reliability. We are continuously upgrading our transmission and distribution systems through system hardening, smart grid initiatives, vegetation management, and more.
Rate before April 1, 2024
$0.026 per kWh + $22 consumer chargeRate starting April 1, 2024
$0.026 per kWh + $27 consumer charge
Distribution charge
Although the distribution charge is a fixed rate, what you pay for distribution each month changes based on how much power you use. Today, a portion of this accounts for the equipment we need to deliver your power. The more power you use, the higher the distribution charge amount, because higher usage can translate to a greater impact on our system, meaning more investment in equipment to serve you. However, increasingly, some of the costs we currently recover through this variable charge are better classified as fixed, meaning that when usage is unusually high or low, we might recover more or less revenue than we need to maintain our system and cover all our costs. It can also mean that some consumers are unfairly subsidizing others through higher kWh use when these shared costs are actually the same regardless of how much or how little power you consume. Because of this, and to keep this required bill increase to a minimum, there is no increase to the distribution component of your rate at this time.
We bill on a cost-based model, meaning our rate structure is designed only to recover our costs of purchasing power and delivering it to you. A period of higher sales doesn’t mean profits; any excess revenue is allocated to you, the members of the cooperative.
Generation & transmission charge
The generation and transmission charge is a pass-through of the price we pay for the power we deliver to you. The sources of that power are plants that are owned and operated by Buckeye Power, which we own along with Ohio’s other 23 electric cooperatives, and a small amount purchased from the regional market. We also pay transmission costs to the utilities that own state and regional transmission lines that transport power from where it is generated to where it is needed. These costs may continue to rise and affect your bill, but as passthrough charges, they are not part of the overall rate restructure at South Central Power.
What this means to you
Once implemented, effective April 1, residential consumers will see an increase in your consumer change from $22 to $27. That’s a flat $5 increase, but with costs rising for South Central and other electric providers across the board, your electricity still remains an excellent value.
How can I lower my bill?
Even after this increase, more than 80% of a typical monthly bill will be based on the amount of electricity you use, providing opportunity for most electric consumers to make small changes around the home that will make a difference in your power bill. Tools like programmable thermostats, weatherizing your home with easy upgrades like weatherstripping around doors, and identifying the largest power users and being mindful of when and how you use them can all make a difference. If you’re a low-income energy consumer and are struggling to pay your power bill, assistance may be available from state, federal, and nonprofit programs.
You can learn more about conservation and financial assistance programs on our website.
Resources for lowering your bill:
From the February 2024 issue of Ohio Cooperative Living.