Commercial Rate Structure Shift
Capital Electric is making rate structure changes gradually over the next 7 years with the first change effective May 1, 2021. The purpose behind the changes is to more closely match our sources of revenue with our sources of cost. This means trying to make the fixed fees we charge our members match the fixed expenses to run Capital Electric.
➢ Why is the rate structure shift necessary?
- The reality is that there are a lot of fixed costs to having the distribution grid in place. The poles, wires, transformers and meters all have to be paid for regardless of how much power we sell.
- Certain activities, such as responding to an outage or generating the monthly bills, that don’t relate to how much electricity you use cost the same either way.
- For many years, a good share of our fixed costs have been blended into the energy (kWh) rate the members pay. This works only if everyone uses their electric service in the same way.
- As our membership grows, the way our members use their electric service is far more diverse than it was years ago. Some are low users and some are high users. Some use power on-peak while other use it off-peak. But, in many cases, the fixed cost to serve them is similar.
- We desire to provide the greatest level of fairness amongst members which, in this case, means acknowledging the fixed costs that exist before electricity is consumed.
- We want to send proper pricing signals to members as our industry changes. Members can invest in technology that can: reduce energy (kWh) consumption, shave their peak (KW), generate their own power (DG), or even store power (batteries). To help members make the best long-term decisions, it is our responsibility to be transparent through our rates.
➢ What was the process?
- To determine the appropriate rate structure shift required, we utilized independent consultants who performed an analysis of our rates and costs using industry accepted best practices. These methods are widely accepted by regulatory bodies across the US.
How long will it take to make the necessary changes?
- It is scheduled to take 7 years with one change happening each of those years. The changes include the introduction of a “Grid Capacity” component and the revenue raised from that component will correspondingly reduce energy (kWh) charges.
- The “Grid Capacity” charge will be a monthly charge that is determined by looking back 12 months and identifying the highest usage of the electric service in that time. That is the level CEC needs to have the grid built to in order to serve you when you need it. That value (kW) will be multiplied by $0.25 to obtain the monthly billable amount. This same process will occur each month.
➢ Is the co-op making more money through this change?
- No, this is a revenue neutral rate shift, meaning it is designed to have no effect to the cooperative’s bottom line.
➢ When does this rate shift start?
- The first change is effective May 1, 2021. It will be reflected on billing statement received by members in June.
➢ How much will this affect my bill?
- Most members will not see a substantial change in their monthly bill, in fact, most will be almost neutral. An illustration showing the Grid Capacity rate as well as the reduction to the kWh rate is included below. For assistance is understanding the specific impact at your location please contact our office.
Click the link below for the March 2021 North Dakota Living article regarding the rate structure shift
CEC announces revenue neutral rate shift