On May 1, 2022, SVEC implemented new rates, to include setting the basic consumer charge for single-phase residential services at $30 and proportionate increases in the electric consumption component of monthly bills. For more details on additional changes in June and July, visit our Explanation of Summer Rate Changes.
A Guide to the 2022 Proposed Rate Revision
Why is SVEC seeking to revise rates?
SVEC must be able to fully and fairly recover the costs related to providing service to its members. This includes maintenance to ensure reliability and safety, planned and unplanned expenses such as those related to major storms, and the capital for system upgrades to meet member demand, all while maintaining adequate margins to meet the financial obligations of its lenders.
Current revenues, cash flows and margins are not adequate to meet those needs in the near term while also meeting financial metrics required by the cooperative’s lenders. Accordingly, SVEC filed for a rate revision with the State Corporation Commission (SCC). This is the link to the case summary: www.scc.virginia.gov/DocketSearch#caseDocs/141888.
With SCC approval granted in March 2022, revised rates were implemented beginning with bills rendered on or after May 1, 2022. Increased costs at the wholesale power level because of surging natural gas prices also took effect on SVEC member bills at this time. When considering the overall impact of the changes, the average SVEC residential member consuming 1,000 kilowatt hours per month will see a 6.5% increase in their average monthly bill over 2021.
In 2021, the average residential member monthly bill for the year was $113 at 1,000 kilowatt hours of use. The expected average monthly bill in 2022, beginning May 1, will be $121 for 1,000 kilowatt hours of use. Of this 6.5% rise in expense, slightly more than 2% is tied to costs passed down to SVEC members from Old Dominion Electric Cooperative, SVEC’s wholesale energy provider that has seen an increase in natural gas pricing.
What steps did SVEC take before filing?
In advance of filing for a rate case, SVEC worked with an independent third-party consultant to undertake what is known as a cost-of-service study to better understand if current rate structures are appropriately recovering costs. The study outlines what changes to the current rates would be necessary to ensure costs were recovered if present rates were not adequate. This information was used to develop the new tariffs and schedules that were submitted for the rate case filing. For this rate case, SVEC conducted its cost-of-service study in late 2020.
The consultant then presented a recommended course of action in the form of a rate case proposal to the SVEC Board of Directors in January 2021. The board approved the proposed rate case in February 2021. SVEC staff filed the rate case with the SCC on March 16, 2021.
What changes did SVEC submit to the State Corporation Commission as part of the rate case?
An overview of the proposed changes are as follows:
- A 2.43% overall increase among member rate classes (specific increases vary from rate class to rate class).
- Typical-use residential members will see a 3.7% increase.
- The basic consumer charge for single-phase residential services will increase $5 and be set at $30. This total is factored into the overall percentage increases mentioned above.
- Demand charge of 10 cents per kW to residential and church members.
- Seasonal pricing for power supply service and an inclining block power supply rate for residential service.
- New rate rider to provide optional community solar subscription service to residential members.
- New rate rider (Schedule AS-1) to pass through a load ratio share of contract costs or savings to PC-5 members.
- Adjusted Excess Facilities Charge applicable to Schedules B-12, LP-12, and PC-5.
- Closing Schedule HPS-1 so all new and replacement outdoor and streetlights will be LED served under Schedule LED-2 and adjusted the LED distribution charges.
- Seasonal members currently served under the seasonal schedule will be served under the residential schedule, Schedule AS-12.
Do members have a voice to express their opinions in the current rate revision? How will members continue to have a voice in future rate revisions?
The cooperative’s Board of Directors is elected by members to represent their interests and that of the cooperative. The board works to see that SVEC operates conservatively and is efficient in its operations and management, making decisions after considering the best interests of all co-op members. The board thoroughly reviewed all aspects of the proposal, including the rationale to propose an increase in the basic consumer charge and the introduction of a small consumer demand charge. After careful consideration, and in accordance with the cooperative’s principles and bylaws, the Board of Directors approved filing the rate case with the SCC.
The cooperative’s proposed residential rate is meant to fairly recover costs in a way that reflects how those costs are incurred. A rate is the sum of its parts, and, in this case, the proposed change in the residential rate design will benefit lower-use members. Members who use more electricity will pay more, which promotes energy conservation for those members who want to reduce their expenses. These proposed changes in energy rates will enhance members’ ability to control their bills in ways that are more beneficial to themselves and all co-op members.
Members are welcome to call the cooperative or submit a written question to staff or the board via contact forms available on svec.coop.
How does the higher fixed consumer charge impact members who have installed solar?
SVEC has a responsibility to serve all members in its territory. A grid-tied solar generator does not remove the need for access to the distribution and transmission facilities to provide service when the sun does not shine. All that access (meters, wires, maintenance, billing and member support) is part of these costs, which are recovered through the basic consumer charge.
Why is there an increase in the fixed consumer charge for the second straight year?
SVEC must be able to fully and fairly recover the costs related to providing service to its members, while maintaining adequate margins to cover planned and unplanned expenses including storm damage, system upgrades to meet demand, and maintenance to ensure reliability and safety.
The basic consumer charge covers a large portion of the fixed costs of having a member connected to the SVEC distribution system. The fixed-cost component seeks to recover the cost, as much as possible, of what is needed to make service available to every member. Even if a member never uses a single watt of electricity, the cooperative incurs costs for constructing, operating and maintaining those facilities, including meters, transformers, poles and distribution power lines. The cooperative is responsible for scheduled and unscheduled maintenance of that equipment to ensure the member receives safe and reliable service, creating additional costs to be recovered. Further, the consumer charge also recovers costs for member-facing services such as Member Services Representatives and billing operations.
It is also worth noting through the cost-of-service study, the rate consultant determined to fully recover costs through the basic consumer charge, the amount would be $32.31 for single-phase residential members. The proposed change still does not fully reflect the true cost of serving every co-op member.
How is the inclining block schedule designed?
During the months of June through September, members who use 800 kWh or less will be charged 6.380 cents per kWh, while those who use over 800 kWh will be charged 9.024 cents per kWh. Billing during the months of October through May will be the same regardless of use, at 6.380 cents per kWh. This change encourages conservation and energy efficiency among the membership, which can help reduce total cost and offset the fixed consumer charge.
Is SVEC’s basic consumer charge, as proposed, in line with other electric utilities?
The cooperative believes its rates should be set based on the information and data specific to its system costs, service area and its members, and not based on a comparison to the rates of other electric utilities. No two utilities, especially electric cooperatives, are the same, considering factors such as number of consumers served, mix of consumer classes (residential, commercial, industrial, etc.) and terrain in general (like running wiring over mountains and through undeveloped land) that can affect cost.
Nevertheless, SVEC’s proposed basic consumer charge is comparable to that of many other electric cooperatives in Virginia.