Lake Region Electric Cooperative
Rate Increase Approved for 2017
During its October meeting the Lake Region Electric Board of Directors approved a 4.3% overall rate increase effective on January 1st, 2017. he actual percentage varies according to rate class and can differ for individual members based on their electric consumption.
LREC last increased rates in 2013 and off-peak heating rates haven’t changed since 2008. In fact, since 2013 LREC has been able to offset or absorb over $3 million in wholesale power cost increases.
New Facility Charge - kWh Blocks Restructured
For the average residential member, the new rate reflects a small increase (see following table comparing the old rate and new rate at various usage levels). The largest component of this change will be a $3.00 per month increase to the Facility Charge. The facility charge is designed to recover the fixed costs of providing electric service regardless of how much, if any, electricity is used. The most noticeable change in our residential rate structure is the move to a single block kWh charge from a declining two block kWh charge. The new single block charge per kWh is lower than the first 1,000 block of our old farm/residential rate
The following is a comparison between the old and new rates for the residential class. The dollar amounts include the facility charge and sales tax.
Monthly kWh Consumption | Winter Old Rate | Winter New Rate |
850 kWh | $123.28 | $124.67 |
1,000 kWh | $141.08 | $142.14 |
1,350 kWh | $179.34 | $182.92 |
Summer Old Rate | Summer New Rate | |
850 kWh | $135.55 | $136.48 |
1,000 kWh | $155.50 | $156.04 |
1,350 kWh | $198.82 | $201.67 |
Cost of Service Used to Develop Electric Rates
Our rate consulting firm completed a comprehensive Cost of Service study that examined all of the co-op’s expenses and allocated them to the appropriate rate classifications. All expenses were allocated as either fixed costs of operating the cooperative utility business or the variable cost of wholesale power and energy. The rate restructuring comes directly from this analysis.
It was clear in our recent cost of service study that the facility charge for our farm/residential rate has not kept pace with increasing fixed costs. The study actually indicated that the facility charge for residential members should be increased by $5.00 per month. However, your board of directors felt it was important to avoid an abrupt change and gradually increase the facility charge, so this year we are holding it to $3.00. In time, we will move the facility charge to equal the actual fixed costs incurred.
The remainder of the fixed costs are recovered in the kWh charge. Wholesale power costs are recovered in the residential kWh charge and those costs have been rising. Since each member household has some ability to control usage, this portion of your electric bill can be reduced through conservation or use of energy efficient lighting and appliances.
The good news is that the 5.4¢ Dual Fuel rate will not change, however the ETS Off-Peak Storage rate will increase from $.044 per kWh to $.048 per kWh. LREC does not have an additional facility charge for these separate rates.
Fiscal Stewardship and Rate Stability
I think you’ll agree that our new rates represent a very modest change, especially in light of the fact that we have held our residential electric rates stable for four years. Your board of directors and the management team at Lake Region will continue to closely manage all of our controllable expenses to be responsible fiscal stewards of your cooperative.
It is also important to note that the new substation and load from the proposed casino is not a factor in the decision to raise or restructure rates. In fact, when the casino becomes operational, it will generate electric sales that will have a positive impact on our revenue, helping with our overall rate stability.
Related Information: see our 2017 Rate Increase FAQs & 2017 Rate Comparison Table