2024 Rate Forecast: An Exercise in Balance

2024 Rate Forecast: An Exercise in Balance - September 2023 CCL CEO Article

By Ruth Marks, MVEA CEO

Ruth Marks, MVEA CEO

Tri-State Announces Wholesale Power Increase

 Mountain View Electric Association is committed to balancing increased power costs with long-term rate stability for our members. Since our last residential rate increase in 2017, the overall cost of providing reliable electricity has increased due to a variety of factors, including inflation; labor and supply shortages; and the industry-wide cost of transitioning to clean energy. During an era of rising costs and industry changes, MVEA has been able to avoid changing our rate structure or increasing rates in recent years — but, changes are coming.

Earlier this year, we shared that our wholesale power supplier, Tri-State G&T, had indicated that it would be changing rates in 2024. Changes to Tri-State’s rate structure directly impacts the rates that MVEA pays for wholesale power, as well as the electric rates of our co-op members, because the expense accounts for 65% of our overall operating costs.

In June, Tri-State announced that its Board had approved an increase in their wholesale power rate and a new rate design for filing with the Federal Energy Regulatory Commission. “Tri-State has bucked electric utility industry trends for large rate increases for seven years,” said Duane Highley, Tri-State CEO. “Through record inflation, higher fuel and energy prices, and supply chain pressures, we’ve maintained increasingly competitive wholesale rates and kept our first rate increase since 2017 well below the rate of inflation.”

This proposed change — if approved by FERC — will take effect January 2024 and will impact MVEA’s wholesale power costs by approximately 8%. This number is important because as a not-for-profit cooperative, the only viable way for us to recover the increased cost of purchasing and supplying power to our members is to share that expense. MVEA’s rates and fees are set to generate revenue to cover operating costs, pay debts on construction loans, and provide an emergency financial reserve — not to create profits.

As we wait on a ruling from FERC about Tri-State’s proposed rate change, MVEA is assessing the best way to offset the rate increase and to minimize the overall impact to members. Last year, anticipating that changes were on the way, MVEA worked with an independent rate consultant to develop a cost-of-service study (COSS) to assist in analyzing and forecasting rate adjustments for each of our member rate classes. The purpose of a COSS is to determine what it costs to serve each member by rate class and to recover those costs in the new rate design. We will be using the COSS findings to support rate changes that are both competitive and create options for MVEA’s membership.

While MVEA cannot control the increasing costs of materials or the rising cost of wholesale power, we can continue to look for opportunities to improve operational efficiency and fiscal stewardship. To that end, this year we implemented a strategic plan that is focused on process and infrastructure improvements to ensure that we are working efficiently to keep the value of electricity high and our operating costs low.

What’s to come? As committed as we are to providing MVEA members with safe, reliable, affordable, and responsible electricity, we are equally committed to member communication about rate change. Please look for updates in this magazine and on our website, www.mvea.coop, as we get a better understanding of what impact these changes will have on MVEA’s rate structure.

In closing, I want to revisit the concept of “beating the peak” that we first discussed in the March issue. When we all work together to reduce energy use during periods of high electricity demand, we can reduce our peak power supply costs paid to Tri-State — a cost that affects every MVEA member. How important is the concept of beating the peak? We anticipate that our new rate structure may provide an incentive for switching high energy use to off-peak hours. It might take some practice, but taking simple steps to save energy throughout the day and shifting energy-intensive chores to off-peak hours can make a big difference. So, stay tuned for more information.