The board of directors of the Delaware Electric Cooperative has approved an 8.86 percent rate increase for its member-customers. At a March 19 meeting, the board agreed to the rate increase proposed by co-op staff. It would take place effective with meter readings on and after April 1, which would include a portion of March usage.
“Because of increased costs from our power supplier, Old Dominion Electric Cooperative, we are seeking to increase the Power Cost Adjustment (PCA) under supplier charges on the right side of your bill from $0.02076 per kWh to $0.03069 or an increase of $9.93 per month for the residential member using 1,000 kWh,” co-op staff stated in a March newsletter to member-customers.
“The Co-op member using 1,000 kWh now pays $112.02. With the proposed PCA increase to $0.03069, the member would pay $121.95 per month,” the newsletter read.
Staff noted rising operation and energy costs as major factors in recommending the increase that was approved last week.
“Our costs to operate and especially our energy costs have gone up significantly (46 percent) and we need to recover those costs in order to stay in business and continue providing you the best energy value in the region,” J. William Andrew, president and CEO of Delaware Electric Cooperative, wrote in the newsletter.
Andrew cited under-collection of energy supply costs in 2007 by some $3.6 million, which he said they were able to subsidize with savings and cuts from delivery costs.
“This year our delivery budgets are zero-growth budgets, meaning that we will be operating at the same cost level of a year ago,” he noted, adding that energy supply costs were anticipated to exceed last year’s levels and that, without a rate increase, a $9.6 million deficit in energy costs alone was projected.
“We cannot operate our business in a deficit spending environment,” Andrew said. “We have adjusted our budgets to minimize the impact of the proposed April 1, 2008, rate increase to our members. Our capital construction budgets have been cut in half (poles, wires, transformers) and our operating and maintenance budgets (“Keeping the Lights On!”) have been held at a zero growth for 2008.”
Andrew emphasized efforts to continue “frugal management of our budgets to minimize the cost of delivery and maximize the value for our members.”
Andrew said state deregulation in 2005 had led to the co-op realizing tens of millions of dollars in savings in electrical rates compared to its competitors.
“Our business model and the management of this business model has enabled your Cooperative to provide a savings of more than $70 million dollars since the removal of deregulation rate caps in 2005 when compared to our largest competitor,” he wrote. “In 2008, even with the proposed April 1 rate increase, we will still obtain a $17 million dollar savings for our members and still have the lowest priced, highest valued electricity in the region.”
However, Andrew warned that the latest rate increase for co-op member-customers may not be the last.
“I wish I could say that our rates will not continue to rise, but I cannot,” he wrote. “I will assure you that we will continue to manage your Cooperative focusing on the high value received in both cost and reliability for our members.
“Many utilities are trying to copy our business model to obtain our level of success. Rest assured, we are not sitting around waiting for them to catch up to your Cooperative but continuously improving our operations, power supply strategies and service to provide the best value possible for our members.”
Co-op member-customers overwhelmingly approved the cooperative’s move away from regulation from the state’s Public Service Commission (PSC) in 2007, and that left the co-op’s board free to vote on the proposed rate increase without any review or intervention by the PSC.
In years when the co-op has accumulated excess revenue, it has traditionally paid a dividend to member-customers. But rising energy costs have eliminated that dividend in recent years. And, this year, the board voted to institute a rate increase.
Under state renewable energy requirements instituted in 2005 with deregulation legislation, member-customers are also offered an optional renewable energy package that adds 20 cents per 100 kWh block in exchange for the co-op purchasing power from renewable sources on that customer’s behalf.