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2022 Rate Revision

On average, a typical-use residential member will see a bill change of about $5 per month.

A Guide to the 2022 Proposed Rate Revision

Updated: October 2021

Why is SVEC seeking to revise rates?

What steps did SVEC take before filing?

What changes did SVEC submit to the State Corporation Commission as part of the rate case?

Didn’t the co-op just have a rate revision in 2020?

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?

What is the new demand charge? Why is it in the rate proposal?

How will SVEC go about implementing the demand charge?

How does the new demand rate and higher fixed consumer charge impact members who have installed rooftop solar?

Why is there an increase in the fixed consumer charge for the second straight year?

How is the inclining block schedule designed?

Is SVEC’s basic consumer charge, as proposed, in line with other electric utilities?


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.

Pending SCC approval, revised rates will be implemented no earlier than March 1, 2022.

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 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.
  • $30 base consumer charge for single phase residential services, up from $25. This total is factored into the overall percentage increases mentioned above.
  • Demand charge of 10 cents per kW to residential and church tariffs.
  • 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.

Didn’t the co-op just have a rate revision in 2020?

The January 2020 rate revision did have a basic consumer charge increase, however, that change was rebalanced in other areas, including a decrease in power costs from our wholesale provider, Old Dominion Electric Cooperative. This was completed through the board’s authority granted by the state legislature and was not a change that had to be approved by the SCC.

The rate case not only accounts for the current cost recovery but must also cover the costs that the cooperative anticipates from the time of implementation until such time as rates may need to be revised again. There are major initiatives on the horizon for the cooperative, including, but not limited to, a fiber network buildout. Therefore, during the cost-of-service analysis in late 2020, it was determined the cooperative needed to adjust rates across all member rate classes to adequately recover these expenses.

It is important to remember since we are a cooperative, any revenues that exceed expenses each year are margins that will be allocated back, and ultimately returned, to members through the capital credits retirement process.

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.

What is the new demand charge? Why is it in the rate proposal?

Using demand charges for the recovery of demand-related costs is a standard and accepted ratemaking practice. SVEC’s infrastructure must always be ready to accommodate peak member demand for electricity, which occur at those times when members use the most electricity. The larger draw of electricity “demand” is directly related to the size and cost of the electrical facilities needed to meet member needs for electric power. These demand-related costs are for facilities from the point of service to the substation to the transmission line to the generating facility, and everything in between. These facilities must always be in place for whenever our members want to use them.

To understand the flow of electricity and facilities along the way for it to reach your home, consider the steps to restoring power in this graphic, which depicts the process from generation to the point of service:

To better recover costs caused by peak consumption (i.e., demand), SVEC is proposing adding a minimal demand charge that will have a negligible effect on members, with most members seeing a charge between $1 and $2 on their monthly bill based on demand usage. Members will pay more, or less, in demand charges based on their highest 15 minutes of demand for electricity each month. Understanding your demand impact on the system will give you greater control of when you choose to make greater use of the electric system resources provided by SVEC.

Applying demand charges to residential rates has not been common practice in large part because of the historically high cost of metering and billing for demand. Until the advent and deployment of advanced metering infrastructure, it was not cost effective to meter the demands of residential members. Therefore, residential rates were designed historically to recover demand-related costs through the energy consumption charge on a per kWh basis.

In the past, the costs for demand have been recovered entirely in the price of electricity consumption (per kilowatt hour). As technology has improved, it has become a less efficient approach to recovering demand-related costs. Demand charges are a more appropriate way to directly recover demand-related distribution costs.

How will SVEC go about implementing the demand charge?

Like many cooperatives, SVEC has deployed metering technology that can effectively meter demand for all members. SVEC is researching available metering technology and plans to install new metering devices and communication infrastructure in the coming years that will be capable of reporting more detailed data on how members are using electricity and how much it costs to operate electrical devices. When those new meters are deployed, more real-time demand information will be available. This will allow members to more effectively both control consumption and demand. Before, only consumption could be controlled.

Education regarding the residential demand charge will be included in bill inserts and related communications. The cooperative is taking an “experiential learning” approach, which is an engaged learning process where members will learn about the demand charge through personal experience and how they can influence it by controlling their energy use.

The proposed demand charge – for the highest 15 minutes of demand each month – will have a small impact on members’ rates. Any future adjustments to this demand charge will be gradual and will allow the cooperative to recover demand-related costs more effectively and equitably. Introducing a minimal charge during this rate case will allow members to learn how to influence their individual demand with energy efficiency best practices.

How does the new demand rate and higher fixed consumer charge impact members who have installed rooftop solar?

Members are becoming more energy efficient overall, and some are investing in alternative energy sources such as rooftop solar for some or all their electricity needs. These shifts in member behavior made it necessary for the cooperative to adopt cost recovery methodologies to ensure reliable service is provided to all members.

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. That is one reason why the cooperative is moving away from a methodology of cost recovery largely based on energy consumption (per kWh) to one that better reflects the cause of costs. This approach is better suited to equitably recover costs across all members, without subsidization by other members.

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.

The cooperative’s overall proposed rate design helps to mitigate the impact of the proposed increase in the basic consumer charge. By setting the basic consumer charge at $30 per month and by adding a demand charge to the residential rate, the proposed rate better protects the cooperative and its members. It ensures a greater level of fixed-cost recovery regardless of changes in energy consumption or load factor caused by weather, conservation, or a member’s own distributed generation. That creates a greater incentive for energy conservation at times when power supply costs are higher than average.

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.