Manager's Report - September 2015
The Future Cost of Electricity
Once again, summer has come and gone way too fast for my way of thinking. School is back in session and fall is just around the corner. That means a lot of football, volleyball, soccer and cross country for us to cheer on our kids and grandkids. That also means it is time for the Kansas State Fair. If you go to the fair be sure to look up the Kansas electric cooperatives’ safety presentation in the Ad Astra Pavilion. It is always a hit with the school kids.
Generation Source Update
This has been a better year, so far, with regard to the cost of the electricity we purchase on your behalf from several different sources. Our power comes from nuclear, hydroelectric, coal, wind and natural gas, which have all had specific issues this year.
The cost of coal-fired generation continues to rise due to new environmental regulations that have cost billions to retrofit our coal generation units in Kansas. Even though much of the previous environmental regulations were struck down by the Supreme Court, most of those expensive plant upgrades have already been made due to the regulatory-required dates of implementation. Most in the industry think that we have built our last coal-fired generation plant even though it is still the cheapest fossil fuel powered source that we have. In fact, the new Environmental Protection Agency Power Plant Carbon Emission Rules may require us to shut down active plants that still have many years of potential generation ahead of them.
On the positive side, nuclear has overcome some of the issues it has faced over the last couple of years. Wolf Creek went through an extended outage this year to replace an emergency water source that had become a maintenance issue. Since restarting the plant, it has run very well and continues to be an affordable and safe source of electricity. Probably the best news is the amount of hydroelectric power we are receiving this summer. The water resources in the Southwestern Power Resources Association reservoirs is at an all-time high. These generators located in the dams of the reservoirs produce our lowest-cost electricity and they have been in a drought state for the last several years. Current reserves are 50 percent above the normal average and we have benefited from that this summer. We also receive a small amount of hydropower from the western states, but they continue to have drought problems.
Your efforts to control usage during the peak hours of 5 to 8 p.m. and the improvements in hydro and nuclear power have helped to slightly lower our energy costs over the last couple of years. While energy costs have come down, the fixed costs to own and operate generation units continue to rise because of regulation and operating costs.
Future Rate Changes
The really good news is that back in 2009, when we made our last residential rate increase and design change, we projected that it would only be sufficient for three years. However, thanks to your efforts to control your usage from 5 p.m. to 8 p.m. for the past six years we still do not need a rate increase. With that being said, the board recommends we make some small revenue-neutral adjustments that help align the rates with the cooperative’s costs. We will be discussing some changes that we think need to be made effective January 1, 2016.
First, we plan to list as a separate item the cost of property tax that we pay for our distribution plant on your bill. Second, we need to make an adjustment to lower your kilowatt-hour (kWh) charge with a corresponding increase to the customer charge. This will remove some of the fi xed costs that are embedded in the kWh rate and put them in the fi xed customer charge. These changes do not increase the revenue that the cooperative receives, but rather it simply moves some of the costs to the proper category on your bill.
We will have more information and a customer information meeting on these changes as we get closer to the end of the year. Thanks again for all of your support.