up with rates?
Rising costs, growing load prompt need for higher
rates at many
|The cost of
producing electricity at Missouri's power plants — such as the
Thomas Hill plant near Moberly — is going up, due to rising fuel
and transportation costs, among other factors. Electric cooperative
member/consumers can anticipate higher energy bills over the course
of the next few years.
What do iPods, computers,
big screen TVs and cell phones have in common? They all use electricity.
And they are all responsible in part for the dramatic increase in energy
use among Missouri’s electric cooperative
This increased demand
for electricity, in turn, is helping drive wholesale power costs to
record levels, prompting for some cooperative members their first rate
increases in nearly two decades.
But increased demand
for electricity is just one culprit in a complicated web of factors
that could eventually show up on your monthly electric bill.
Missouri’s electric cooperatives, with the exception of Citizens
Electric, receive their power from Associated Electric Cooperative. Associated
was formed in the early ’60s to generate electricity for co-op members.
Associated sells wholesale power to six transmission cooperatives, which
in turn sell it to 51 distribution cooperatives in Missouri, southeast Iowa
and northeast Oklahoma.
Associated’s wholesale rates are among the lowest in the country
and have been partly responsible for the low and stable rates enjoyed by
In April, Associated’s
board, made up of managers and directors from its six member generation
and transmission systems, implemented the tough decision to raise wholesale
rates. That increase was Associated’s first since 1985.
increase trickles down from the transmission cooperatives to the
local level, decisions will be made that determine whether your local
system raises its rates and how much that increase will be.
Increases in the price of coal, combined with higher rail shipping
costs from the Powder River Basin in Wyoming where it is mined, are
in part responsible for the increase in wholesale power costs to
your electric cooperative.
driving this need for additional revenue? Here are some of the issues
that are making the increase necessary.
Demand for electricity
that the state of Missouri was adding a new city with 30,000 homes
every year. That’s the number of homes that could be powered
by the increase in demand electric cooperatives are seeing annually.
This dramatic increase is expected to continue at least for the next
To keep up with the
demand for power, Associated Electric Cooperative is adding new generation
to ensure there will be adequate supplies in the future. Associated’s
forecasts show its members will require an additional 100 megawatts each
Since costs for building
materials and labor have increased dramatically since Associated’s
last large-scale power plant was built in 1982, it’s
logical to anticipate that electricity from the new plant will cost more
On the drawing board
is a new 660-megawatt power plant proposed for Carroll County in northwest
Missouri. This plant offers the most economical option to meet members’ long-range
The plant, slated
to come online in 2013, is expected to cost $1.3 billion. That amount
is 30 percent higher than it would have cost just two years ago. Worldwide
demand for power plants is in part responsible for this increase. China,
for example, has ordered 60 similar new plants.
To longtime co-op
members and employees, today’s rate increases bring
up reminders of the 1980s, when wholesale power costs went up after
Thomas Hill Unit 3 began operation.
In some ways what
is happening today is similar. But many other factors not around in
the 1980s have co-op employees looking for ways to cut costs as much
Generation fuel costs
|In 2002, Power
magazine recognized AECI's St. Francis Power Plant as one of the
top 20 combined-cycle generating plants in the country, noting
its low emissions and efficient performance. But rising natural
gas costs at plants such as this contribute to pressure on electric
One of the key drivers
of rising energy costs is the price of fuel used to generate power.
Today, Fuel costs are nearly 35 percent of total expenses. Just 10
years ago, that figure was 25 percent.
cost for fuel per unit of generation has increased 81 percent between
1996 and 2005. Topping
the list of fuel increases is natural gas, which was 49 percent higher
in 2005 than in 2004.
In its 2004 long-range
financial forecast, Associated projected gas to be nearly $7 per million
Btu by December 2005. Instead, natural gas prices got up to $15.40
per million Btu on Dec. 14 and averaged $12.98 per million Btu in December
2005. Since then, however, the price of natural gas has steadily decreased
While coal is still
the best value for generating electricity, the price of coal also is
on the rise. This is in large part due to increases in shipping coal
to Missouri from Wyoming, where it is mined. Also nationwide demand
for low-sulfur Wyoming coal is driving prices higher.
coal price increases totaling 25 percent by 2011 and annual increases
of 3 percent per year from 2011 to 2025. It also expects railroad
contracts for delivery of coal to increase when current contracts expire.
In 2007, alone, increases will add $30 million in costs for Associated.
The cost of compliance
another factor is driving wholesale power costs higher. Associated
has reduced air emissions from its power plants dramatically over
the last 10 years. Gone are the days when black smoke came from power
plant smokestacks. Drive by a power plant today and you will be hard
pressed to tell whether it is in operation.
The rising cost of shipping coal from Wyoming to Missouri power
plants, like the New Madrid facility pictured here, will add to the
need for increased electricty prices in coming years.
improvements have not been inexpensive. And future improvements will
also carry a hefty price tag. Total capital costs through 2018 for
additional environmental controls are estimated at $468 million, with
operating costs increasing by $31 million per year.
Even with the increases
in wholesale power costs, Associated will remain one of the nation’s
lowest-cost wholesale power suppliers. By forming their own generation
cooperative, Missouri’s electric cooperatives have been
able to control their own destiny when it comes to rates. Your electric
bill would be much higher if your electric co-op had to depend on
others to meet its energy needs.
What can you do?
what can you, as a cooperative member, do to help keep rate increases
to a minimum?
• Use energy
wisely. Since increased demand is in part responsible for higher rates,
turning off unneeded lights and keeping thermostats at reasonable levels
• Avoid using
appliances when demand for electricity is at its highest, usually on
the hottest or coldest days of the year and during the early morning
and late afternoon hours. Dishwashers, for example, can be set to run
after bedtime or after the morning rush is over.
• Replace aging
appliances with new ones. Nearly all appliances sold today operate
more efficiently than ones even five or 10 years old. Look for the
Energy Star rating for the highest efficiency.
• Take advantage
of any load-shedding programs your cooperative offers. These may
include letting the cooperative install a control on your water
heater that shuts it down for a brief, unnoticeable period to avoid
setting new peaks. Due to the way rates are set, higher peaks can
cause your cooperative to pay higher wholesale power rates for
years to come..