A Balanced Investment Among Members – September 2016 CCL CEO Article
By Jim Herron, MVEA CEO
Many services that we use in our homes or businesses have some form of a monthly charge to cover the cost of providing the service. It might be called a service charge, basic charge, fixed charge, or monthly minimum charge. For Mountain View Electric Association, Inc. (MVEA) members, this monthly charge is called a grid access charge. It plays an important role in ensuring the financial health of the co-op and influences our ability to provide safe and reliable electricity while also allowing for a balanced investment among our members.
Traditionally, electric utilities recovered the majority of operating costs through variable kilowatt-hour charges. That practice evolved as cost-of-service studies uncovered a trend that greatly impacts the fiscal health of electric cooperatives throughout the U.S.: variable kilowatt-hour rate structures do not address fixed costs in an equitably proportionate way among coop members and can impact the long-term financial health of the co-op due to variations in energy use.
As an electric cooperative, MVEA’s rates and structure are influenced by the principle that all members shall pay an equitable and reasonable investment back into the cooperative. Relying solely on kilowatt-hour charges creates an uneven balance of investment between low- and high-energy-use accounts, and impacts the ability of electric co-ops to address the rising cost of wholesale power, the increasing costs of materials and the financial impact of evolving state and federal regulations. The advantage of having fixed costs covered by fixed charges is the ability to maintain a sound financial position and reliable services that are not influenced by fluctuating kilowatt-hour sales.
MVEA’s grid access charge helps offset many of the regulatory and business requirements associated with the costs of operating an electric cooperative: the operation, repair, and maintenance of MVEA’s entire system of lines (including materials), meter testing, pole inspection, tree-trimming, interest, depreciation, and property tax expenses, as well as insurance. These expenses are relatively fixed; they do not vary according to your electricity use.
The grid access charge also addresses the challenge of low- or no-use accounts: the cost to operate and maintain our system exists even if no electricity is used. It helps to protect our investment of $6,000 per electric service, an average cost that is also independent of kilowatt-hour sales. Whether a kilowatt hour of electricity is used or not, MVEA is accountable for providing safe and reliable electricity to over 43,000 members in a 5,000 square mile territory with over 52,000 meters and 6,000 miles of energized line. That is a lot of responsibility and it is shared by both MVEA and our electric cooperative members.
Did you know that we are one of the only industries that encourages less use of our product? MVEA encourages all members to take advantage of energy efficiency and renewable energy programs to help decrease kilowatt-hour energy use. How can we do this? We can continue to offer energy efficiency programs and invest in smart technology that will allow our members to decrease their electric use because of the fixed charge for a fixed cost model. For a little over $1 per day, the grid access charge ensures each member is contributing to operating, maintaining, and improving MVEA’s system for existing and future members alike. It is your electric cooperative investment, at work for you.
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