New rate structure creates sticker shock for REMC customers November 30, 2010Posted by Laura Arnold in Uncategorized.
Tags: Hoosier Energy, South Central Indiana (SCI) REMC, Utilities District of Western Indiana (UDWI) REMC
Her electric bill from the Bloomfield-based Utilities District of Western Indiana REMC the previous month, before the rate hike kicked in, was $234.
The Brim family could not afford to pay more than double what they had expected.
“Everywhere you go, the REMC bill is a topic of discussion,” said Brim, secretary at Avoca Baptist Church in Lawrence County. “We are constantly receiving calls for help with electric bills. How are these people going to make it?”
She heard of one family that moved out to their camper and used a generator during the peak summer months to cut out the cost of air conditioning their house.
In March, Kim Holt bought the family business, Holt’s Cafe in Judah, from her parents. She took over paying the bills, and was shocked when the June REMC bill was more than double what it had been the month before.
“It was really hard to make it through the summer because I had not expected it to go up like that. I guess I wasn’t paying close enough attention,” she said. “We had to let some things go to pay that, and then, when the rate went down this fall, I tried to catch up.”
She said electric bills often are the talk of the restaurant these days. “And at the fair this summer, everybody was talking about it. The farmers and the older people, they get really upset,” she said.
It’s been suggested she could raise her meal prices to help pay the electric bill. “But I just can’t do that, because my customers are facing the same increases I am, and they might stop coming if I charge more.”
Why the increases?
There is a valid reason behind the rate increase and billing changes affecting UDWI REMC customers, who now pay more per kilowatt hour (kWh) during the three hottest and three coldest months of the year, when they consume more power to keep cool, then stay warm.
During more temperate months, when customers consume less, the rate dips way down, from 13.6 cents per kWh to 7.3 cents.
Here’s why: Like the 17 other electric cooperatives that purchase their electric power in bulk from Bloomington-based Hoosier Energy, UDWI pays for it as the company is billed. Hoosier Energy’s new rate structure charges more for power during peak-use times, and less for energy consumed when demand is lower.
That’s because Hoosier Energy pays more for electricity during peaks and passes the cost along to its REMC consumers. During low-use times, those costs are greatly reduced.
Brian Sparks, chief executive officer for UDWI REMC, said he had to change the rate structure to be in line with the bills he receives from Hoosier Energy. Electric cooperatives do not have huge sums of money on hand to pay in advance, Sparks said. Instead, his REMC is customer-owned, not a private corporation or utility.
Over time, Sparks said, consumers’ high and low electric bills balance out, although REMC officials admit the new rates will result in users paying about 5 percent more during the course of a year. “The biggest increase I have seen, figuring over a year, was 9 percent,” Sparks said.
“We do realize it has hit people hard, especially with the economy the way it is. But this is how we are billed, and we have to balance our cash flow,” he explained. “The increase to customers is revenue neutral for us. We don’t make more money charging these rates. It pays for the power as we are billed for it.”
Customers have known the billing changes were coming for several years, Sparks said. As the time grew near, he held eight meetings around the 11-county district, serving a meal and explaining how the new system worked. He addressed the upcoming change in the REMC newsletter each customer received. And it was a topic at the cooperative’s annual meeting in April, held at Bloomfield High School and attended by 600 people.
“Yes, we were aware, but I guess everybody just didn’t realize how much it would be. It did not kick in that it would be this bad,” Brim said. “Then we had a really hot summer, so it was even worse.”
First a drop, then a panic
Struggling families and people on fixed incomes most often receive the same amount of income every month and count on bills to remain somewhat steady. So when UDWI REMC customers such as William and Shelley Brim saw their bill increase from one month to the next by 117 percent, panic set in.
This past spring, the Brims and 19,000 or so other households and businesses benefited from a low rate UDWI REMC’s board of directors initiated in April. The kWh cost was slashed to just 7.3 cents, a rate not seen for 15 years. Before that, UDWI REMC members paid a straight rate of 10.3 cents per kWh all year long.
No one complained about the low bills when the rate went down three cents.
Then came June, and the kWh rate jumped to 13.6 cents for the next three months. It was a hot summer, so increased air conditioning use plus the higher rate combined to create quite a shock for customers when they received their summer electric bills.
Many complained. Loudly.
“We heard from people, of course. It is a big change,” Sparks said. “An increase like this is not something that is common in this area.”
Brim, the church secretary, often fields requests from church members needing help paying utility bills. Those inquiries soared. More than 1,000 customers signed petitions “to voice our concern and confirm the hardship that this has placed on individuals in this community.”
Citizens were up in arms over the summer, although the clamor died down when the 7.3-cent rate returned for the temperate fall months of September, October and November.
But come Wednesday, UDWI REMC customer’s rates will jump back up to 13.7 cents per kWh. They will remain at that rate until March 1.
In a letter to news organizations asking that someone look into the rate structure, Brim outlined her concerns.
“It doesn’t seem right,” she wrote. “What about the many that get laid off in the winter months? What about the people that are struggling and now are hit with this? What about people on budgets or Social Security? And the elderly, who have to choose air or heat over their medications?”
Brim is not one to stir things up. But she had to do something on behalf of the REMC customers she kept hearing from. She wrote a letter and prepared a petition. “Somehow, I have ended up being the voice behind it all,” she said.
The evening of Nov. 4, Sparks and two UDWI REMC board of directors met with the Brims at Gulletts Creek Baptist Church, where William Brim is the minister. “They explained why the increases happened and said this is what had to happen to keep from building more power plants and that Hoosier Energy’s increases and government regulations were behind it. They talked about something called ‘cap and trade,'” Shelley Brim said.
Then they asked her why she had not said much during the presentation. “I said all of that was just fine, but it would not do anything to help people who could not afford it.”
The men told her about REMC’s budget plan. The power company determines how much power a household likely will consume, based on past usage, then divides that amount into 12 payments.
“For now, our bill will be $315 a month,” Brim said. “It would have been just $173 for October because of the lower rate, but of course it’s more on the budget because it tries to even it out.” She’s hoping for no more $500 REMC bills.
After the meeting, Sparks sent someone to the couple’s mobile home to check the insulation, windows and doors to make sure the home was sound in that regard.
“The guy said everything was fine as far as efficiency goes,” Brim said.
Sparks said consumers of electricity must realize costs will continue to increase. The way to save money is to cut back usage, and high rates during peak times should encourage people to do that.
“It’s hard to think about saving money and cutting back on something you never see,” Sparks said.
Other customers already affected
UDWI REMC customers are not the first, or the last, to face new rate structures for electricity. South Central Indiana REMC, based in Martinsville, is ready to launch new time-of-use residential rates that will be higher during peak times.
But they haven’t implemented the system yet, realizing the cooperative’s 39,000 members — many in Morgan, Monroe, Brown and Owen counties — have not been educated in the merits of the rate change and the reasons behind it.
SCI REMC’s new structure has a flat 7.5-cent-per-kWh rate during March, April, May, September, October and November. During June, July and August, though, the rate jumps to 20.17 cents during peak times, which are noon to 10 p.m. Monday through Friday. The rest of the time, the rate goes down to 7.5 cents.
And during the frigid months of December, January and February, the peak rate — from 7 to 10 a.m. and from 6 to 9 p.m. weekdays — is 21.97 cents. Again, it goes down to 7.5 all other times.
CEO Kevin Sump acknowledged the rate structure is complicated. But since it reflects the rates Hoosier Energy charges SCI REMC, it makes sense.
He tried the new time of use system on his own home, without changing his usage pattern, and said he would have saved $102 over a year because he and his wife are not home to use power during the day. Making a change like moving laundry to weekends could make a big difference under such a plan, he said.
Consumers of electricity can direct their usage to less-expensive times and save money for themselves and energy for the environment. And both REMCs soon will offer equipment that can ramp down a household’s usage during peak times by activating a switch to turn off an air conditioner’s compressor, for instance, or shut down a water heater for a period of time.
“This kind of change results in reducing usage as people become more aware of the reality of the costs of electricity and how it is charged,” Sump said. “They physically reduce usage and move it to less expensive times. We need to influence consumer usage patterns away from peak times. Because the only environmentally friendly kilowatt hour is the one we do not produce.”
Average residential electricity consumption UDWI REMC customers, 2009:
13,776 kWh annually, average of 1,148 kWh per month
Source: UDWI REMC
Average electricity consumption for U.S. residential customers, 2008 (most recent year available):
11,040 kWh annually, average of 920 kWh per month
Highest electricity-consuming state: Tennessee (15,624 kWh annual avg.)
Lowest electricity-consuming state: Maine (6,252 kWh annual avg.)
Where it goes
Greatest U.S. electricity consumption, by source:
3. Water heating
7. Clothes dryers
9. Cooking appliances
Source: U.S. Energy Information Administration
Copyright (c) 2010, Herald-Times, Bloomington, Ind.
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