I remember my second day on the job at Central Vermont Public Service when the process of setting electric rates was explained to me by the utility’s head of ratemaking. My head was swimming with numbers when the CEO, Tom Webb, whom I had never met, popped into the room. Shaking his head, he told me the only thing I needed to know about rates is to keep them as low as possible and always at or below the rate of inflation.
United Power’s staff has worked diligently to keep all costs in check, including insurance premiums. Initiatives like our industry-leading wildfire mitigation plan have allowed us to secure insurance coverage and keep premium increases low. The same is true for the efforts around insurance for cybersecurity, medical, and facilities.
Additionally, the entire organization is working to improve processes to better manage resources and ensure high reliability as costs increase. The cooperative is identifying pathways to optimize efficiency, such as expanding its asset management program to allow for more cost-effective planning.
We have all felt the recent challenges of inflation. Here at your cooperative, we have held rates flat since Jan. 1, 2020, despite galloping increases in all areas. A typical distribution transformer found near your home used to cost $1,747 in 2019 and today runs $3,113 – assuming one is even available due to supply chain shortages. The cost for larger units has increased nearly 150%, from $35,689 to $88,286. Even simple electrical cable, the main commodity in our business, has gone from $2.39 per foot to $3.81 – a 59% increase!
Power supply represents 75% of our costs. No matter how well we manage the other 25%, the cost of power has the largest impact on rates. Our current power supplier has filed at the Federal Energy Regulatory Commission for a considerable rate increase effective Jan. 1, 2024. The change in their rate structure will impact United Power significantly due to the shift from generation costs to transmission. Specifically, if they charge more for transmission – to deliver the power – those costs will have an effect on the rates we have to pay on your behalf.
The good news is that effective May 1, 2024, United Power will move to a competitive market for power with the selection of at least nine providers. Over time, we will have more control over our generation costs as we increase the amount of carbon-free resources and deploy and manage one of the nation’s first distributed battery storage systems. These systems will allow us to buy and store power when energy prices are low and use it when the demand is high. As a wholesale energy market comes to Colorado in 2026, we will further be able to leverage becoming a distribution system operator by buying and selling resources across the western marketplace.
Even with our concerted efforts, we must implement a rate increase across all our member classes, because we recognize the importance of operating a financially strong member-owned cooperative. We are extremely conscious of the impact that even a small rate increase has on our members and commit to continue working to find ways to lower rates into the future.
United Power wants to work with you to help manage your electric bills and has a team of dedicated employees to provide information, audits, and tips to moderate any rate impacts. They can be reached during normal business hours by phone at 303-637-1300 or via online chat at www.unitedpower.com. Likewise, members may email the United Power Member Services team.
The new rates, which go into effect Jan. 1, are split between the demand charge and energy charge. The energy component will include a power cost adjustment, providing us the flexibility to move that portion up and down if needed.
Inflation has risen a staggering 21% since our last rate increase four years ago. I hear my old CEO’s words echoing in the back of my mind: “…keep rates as low as possible, and always at or below the rate of inflation.” Tom, we are working hard to do just that!
Please feel free to reach out to me with any questions.