Rising PCA

** December 5th update…The cost of electricity continues to increase. The PCA projections issued last month are already out of date. PCA rates for December bills were changed from the projected charge of $0.0080/kWh to $0.0090/kWh to ensure positive year-end margins. January bills were estimated to have a $0.0095/kWh PCA charge, but for now we plan to keep it at $0.009/kWh for December’s usage/January bills (see table below).

January bills will also have two new line items, with no charge at this time – Residential Demand & Delivery Cost Adjustment. How these lines will be utilized, and new rates executed has not been decided, but we are working on designing new rates now that can be expected to be approved early 2023. This is a complex process of pulling interval data from our new metering system and running it through various financial models to ensure fairness amongst all consumer-members. As soon as the new rates are determined we will be sharing them with you.

We will continue to update you monthly, however, to ensure that you have the most recent information between magazine issues, we ask that you please check here for the most current information regarding our rate adjustments during this uncertain and volatile time.

As described in the September 2022 issue (of the Illinois Country Living magazine), we are experiencing external pressures on our wholesale power costs among other economic factors such as supply chain and inflation that are all out of our control. Budgeted amounts for power costs and construction expenses were more than expected. At a distribution utility level, not only are everyday items we need for new construction and maintenance on short supply but at a significantly higher price. Transformers and meter bases are necessary to our daily function. Transformers used to take on average 2-4 weeks and are now taking 3-6 months, about 4 times longer. Meter bases, that we give out to our membership for new services, used to take 1 month are now out 1 year, nearly 12 times longer. We are seeing material pricing increases from 10 to 500%. This is concerning to all utilities as a whole and therefore many are ordering more, putting additional pressures on suppliers. Due to scarcity concerns, increased pricing and longer lead times, we have increased our warehouse material and supply here at EECA. What used to be a $435,000 warehouse value of supplies pre-COVID is now nearly $1.2M – 25% more inventory with double the cost.

As a wholesale power purchaser, our cost of power as a percentage of revenue – what we pay our power generation & transmission cooperative, Southern Illinois Power Cooperative (SIPC), was 61% last year. We started the year with strong positive margins but have acknowledged a negative margin in the last 5 of 9 months. To-date, our cost of power is on track to exceed 65% for 2022, currently absorbing these increased costs in real time.

SIPC is dealing with similar but different issues. Fuel to fire the generation of electricity in Marion, such as coal, makes up 80% of their over $100M yearly budget. In 2021 and prior, coal was approximately $40/ton, where today it is well over $200/ton. They are currently able to gradually raise our prices due to power they are able to sell in the market, at an almost all-time high, as well as deferred revenue from previous years. The energy market was in a decade-long stretch of low wholesale power market prices. Since then, energy prices have increased at percentages in the U.S. and around the world that have not been seen since the 1980s.

These additional costs to us are built into a power cost adder (PCA) line on our monthly bill from SIPC each month. In September, we discussed how the PCA on your bill would be increasing from $0.002 per kilowatt-hour (kWh) to $0.004/kWh. For the average home of 1,800 kWh, the additional PCA would be $3.60 per month. Effective for October usage, the PCA on the November bills will be raised to match the additional PCA charges we are projected to receive from SIPC, to keep intact the financial integrity of the cooperative. The PCA was created to fluctuate to balance these variable costs. As of today, we are considering these costs as variable, with no real data to build permanently into our rate structure.

In 2020 we were able to reduce the residential rate for electricity by 1.9%, and lowered again by an additional 1.5% in April of 2021, for a total of a 3.4% reduction.

As a cooperative, our mission is to provide safe, affordable, and reliable power to you. Our cooperative and our board of directors are committed to this mission and to those in our communities. We continue to adapt to evolving circumstances and will continue to keep you informed along the way. As being a member of the cooperative, any margins at the end of the year will be allocated back to the membership and in future years paid back in patronage dividends.

What to expect: When our consumer-members receive their November bill, you will see a PCA charge of $0.006. For members that use 1,000 kWh that is an additional amount of $2.00, for a total amount of $6.00 per 1,000 kWh. This amount is variable to the amount of energy you use. This PCA line will continue to gradually increase until more questions are answered on longer term projections. Below is a table of EECA’s preliminary plan to contend with these rising costs to us.

As we continue to address rising costs, our plan is to ensure that you stay informed. We plan to only pass along increased costs to us to the membership. The is only a plan and is subject to change as our costs and scenarios continue to change around us.