Lake Region Electric Cooperative
Cost of Service Study to Review Rates
Electricity provides an incredible value, touching our daily lives in hundreds of ways. Just think of the power electricity puts at your fingertips! Each year there are more electronic devices and conveniences put on the market. Electricity and technology continue to evolve and improve the quality of life for the average American, whether living in a rural area or a city. In many respects, electricity is a modern equalizer in information access, entertainment, convenience, and basic needs.
We often hear our billing statements referred to as the “light bill.” That may have been an accurate description several decades ago. Today, however, your Lake Region Electric Cooperative bill is for so much more. Lighting is typically only a small percentage of your electric usage these days.
We operate this business as a not-for-profit, member-owned electric distribution utility. Just like you have a monthly electric bill, Lake Region also has a wholesale power bill. Additionally, we face the expenses relating to building and maintaining our physical plant, vegetation management, business operations, and so forth. Many of these expenses are incurred regardless of the amount of electrical usage by our members.
Your board of directors and management personnel periodically evaluate our retail rate structure. Our goal is to use our guiding co-op principles to make certain our rates are truly representative of our costs. We are currently conducting a cost of service study with the help of an industry consultant. We will look at everything—the wholesale cost of power from Great River Energy, the effect of solar contributions to our local grid, the cost of infrastructure, and so forth.
When finalizing retail rates, we break them into their contributing parts:
- The energy charges billed by kilowatt-hour (kWh) consumed.
- The infrastructure costs which are not dependent upon the amount of energy consumed. This is reflected as the facility charge. We know our facility charge is less than the actual cost of having an energized service available.
Please know that keeping charges equitable, fair, and supportive of the cooperative’s strategic financial plan is always our primary goal. Watch for more information on this in the months to come.
New Solar Array Geared for Peak Electric Hours
There is no doubt that solar energy is having a positive impact for all Lake Region members. Renewable energy is a winner when used in the co-op business model and the benefits go back to co-op members through capital credits. We have completed two community solar projects at the cooperative and are in the process of planning for a third. In addition, we have installed a small TenK solar array as a demonstration pilot. The demonstration array is aligned to the southwest which will optimize production during the peak demand hours in the early evening when market prices for electricity are highest. Standard solar design maximizes energy production but most of that energy is produced midday through the afternoon.
Lake Region is also seriously investigating a community solar project with Detroit Lakes. We think it makes good sense to work with our neighboring municipal utility. This will allow us to offer more community solar to Lake Region members. Details on this will be coming soon.
Capital Credits Approved
Your board of directors recently approved the retirement of $1.15 million in patronage capital credits in 2016. This is equal to 2.5% of equity. The capital credit disbursement will appear on the billing statement you receive in December. The financial plan is to bring down the disbursement cycle to a 20-year rotation by the year 2020. The 2016 capital credit disbursement is a step in this direction. This will make four consecutive years in which Lake Region’s capital credit retirement has exceeded one million dollars!
Tim Thompson, CEO
