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Residential rates will increase 8 percent with May 1 billing Rural Missouri Back Pages February, 2008 Residential members of Farmers’ Electric Cooperative will receive a general rate increase of about 8 percent this spring. The rate increase will go into effect with the May 1 billing period. Commercial and industrial rates will also change and vary based on usage and current rate classifications. The rate increase marks the second consecutive year that FEC has adjusted its rate, but it is only the third rate increase for its member-owners since January of 1991. Farmers’ Electric did lower its rates in 1995. “Unfortunately, the rate increase we received from our power supplier required us to take this action,” said Mike Sanders, FEC CEO. “We did explain to the members who attended the June 2004 Annual Meeting of the cooperative and in a number of articles after that meeting that there would be a series of rate increases over the next eight to 10years. ”Sanders said there was more than one factor that resulted in the upcoming rate change. Sanders said the increased demand for electricity, the rising cost of coal and natural gas used to generate the electricity, and increased maintenance costs and environmental costs in operating the power plants were all major factors. “We did absorb more of the rate increase than we passed along to our member-owners, ”Sanders said. “We have been aggressive in minimizing the increase, including cutting costs for our 2008 budget. ”Average residential usage on the FEC system is about 1,100 kilowatt hours per month. At 1,100 kilowatt hours, the price will change from $104.66 to $113.01 a month, which is an increase of $8.35. The availability charge will change from $17 to $18 a month. The price of a security light will change from$7 to $7.50 a month. Sanders did emphasize the importance of the continuation of the brush control program and the maintenance of the cooperative’s distribution system. “We are not going to sacrifice our service reliability to you in an attempt to keep our rates slightly lower, ”Sanders said. FEC members received a letter at the end of January outlining the change in the cooperative’s rate structure. See related story below... Rates Will be
Raised in 2008 Our power supplier has informed us that we will have a substantial increase to our cost of wholesale power in 2008. There are several reasons for this increase, the most predominant being the increased demand for electricity, the rising cost of the coal and natural gas used to generate the electricity, and increased maintenance costs and environmental costs in operating the power plants. Associated Electric Cooperative Inc. (AECI) generates our power. They generate this power by a variety of methods, using wind, hydro, coal, and natural gas. Coal is the most inexpensive way to generate reliable base load power. The AECI coal-fired plants generate 86 percent of the electric power that is used by members of cooperatives in Missouri, southern Iowa, and north-east Oklahoma. AECI also uses its natural gas plants to generate power during peak times, and to meet the growing base load demand. The rising cost of coal and natural gas play a huge role in the increased cost of power, but the increased demand plays an even bigger role. The 'mix' that AECI has to use to generate the necessary power has shifted as the demand has grown. More power has to be generated at the natural gas plants, which are the most expensive to operate. Having this more expensive power make up a bigger percentage of the 'mix', drives up the average price - which in turn drives up the cost to us. The five coal-fired plants that AECI has were built in the 1960's and 1970's, and the costs of maintaining these plants are increasing. In addition to the rising maintenance costs, AECI has also spent millions of dollars to meet the latest EPA regulations. AECI is spending $330 million at its Thomas Hill power plant to install selective catalytic reduction equipment to reduce nitrogen oxide emissions. All of these factors have had a tremendous impact on the cost to generate power. That cost has been passed on to us, and we have to pass it on to you. Your management staff is working hard to see what options are available to us to minimize this rate increase, yet maintain the financial stability of the cooperative. Once we have studied the options, we will share this information with your Board of Directors, and together we will decide how much of a rate increase is necessary. This decision will then be shared with you in a future newsletter. There are other articles in this newsletter that explain what you can do to help reduce the size of future rate increases. Using energy efficiently and wisely will help reduce the amount of your electric bill today, and can also help reduce the amount of your future bills. |
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