Customers of the Intermountain Rural Electric Association could see rates climb in 2013 to help offset increases in wholesale power and transmission costs.
IREA’s average residential customer living in an unicorporated area — who uses about 950 kilowatt-hours per month — would see a rate increase of about $3 per month, about a 2.9 percent boost, plus an additional $10 monthly service charge, IREA general manager Pat Mooney told about 25 Conifer area residents at a Nov. 28 luncheon. IREA has seen a 22 percent increase in its own costs.
IREA's elected board will vote on the rate increase in February. Notices to customers about the increases are going out this week, said IREA spokesman Bill Schroeder. Customers with opinions about the rate increase can contact customer service representatives between now and the final February hearing.
The last time IREA raised its rates was in November 2009.
“We pay for transmission to have our power transmitted to us, as well as buying power,” Mooney said. “We’ve seen nine different increases since 2009, and 2009 is the last time that we raised rates. … And that’s even with Comanche 3. … We’ve been absorbing these costs. (But) they’re real; they’re going to continue.”
IREA buys most of its wholesale power from Xcel Energy. A small percentage comes from the Western Area Power Administration.
Comanche 3 is a coal-fired power plant in Pueblo, a quarter of which is owned by IREA.
What the rate hikes will look like
IREA’s basic energy charge for residential users would increase $0.00346 per kilowatt-hour, bringing the cost to $ 0.12310 per kilowatt-hour. The cost is currently $ 0.11964 per kilowatt-hour.
In addition, IREA would institute its first-ever $10 basic service charge for every residential user. This is intended to cover some fixed service costs, like infrastructure, metering and billing. Mooney said it actually would require a $23 service charge for each residential user to cover all fixed service costs, but “that would be too much for some of our customers.”
IREA would eliminate its monthly minimum use requirement, which Mooney said could help lower some customers’ rates, particularly those who use very little energy.
Reasons for the rate increase
Mooney attributed much of IREA’s shrinking profit margins to higher costs without the growth to cover them.
In 2010, IREA’s net revenue was about $30 million. In 2011, it was $20 million, and Mooney estimated that by the time everything is figured for 2012, it will be down to $10 million or $11 million.
“Next year, it would be negative if we didn’t raise rates,” he said. “Our costs are going up; our margins are falling.”
The cost of wholesale power from Xcel Energy has been increasing. IREA’s property taxes have also increased by about $7 million since 2009, Mooney said.
And IREA isn’t adding as many customers each year as it once was. In 2007, the co-op added nearly 2,000 new customers. In 2011, it added fewer than 1,000 new clients.
The clients IREA does have seem to be tightening their belts as well.
“Customers are using less power than they used to rather than more,” Mooney said.
Mooney said IREA has tried to make some reductions, including cutting employee benefits and the size of its vehicle fleet.
“But the fact of the matter is, we’re looking at an increase,” Mooney said.
Legislative costs and concerns
IREA officials also attribute some financial pressures to political requirements, Schroeder said.
IREA has had to spend some money to comply with various regulatory agencies, including about $3 million over the last three years to meet reliability standards from the North American Electric Reliability Council, according to Mooney.
Schroeder said Colorado’s Clean Air Clean Jobs Act and regulations from the federal Environmental Protection Agency also have driven up costs.
Mooney said it’s possible that renewable energy standards may be raised at the federal level. Right now, IREA’s renewable standards are met through its association with Xcel, which has an extensive renewable portfolio. Mooney said he believes if the standards are raised, however, IREA will have to look into other options.
The Comanche 3 power plant went into commercial production in mid-2010 and has had technical troubles ever since. While the plant is at full capacity, it theoretically should produce about 45 percent of IREA’s electrical needs.
While 2011 and the second half of 2010 were rocky — with Comanche 3 producing near capacity for only a handful of months — Mooney said at the Nov. 28 meeting that 2012 has gone much smoother.
Mooney didn’t say during the meeting whether Comanche 3’s less-than-stellar performance has had any impact on IREA’s decision to seek a rate increase.
IREA’s ownership interest in the plant was supposed to significantly lower its wholesale power costs, since using Comanche 3 energy is cheaper than buying the power from Xcel Energy. When Comanche 3 isn’t producing enough power, IREA buys backup power from Xcel.
Xcel owns 67 percent of Comanche 3, and also staffs and manages the plant.
In July 2012, IREA’s board — along with Aspen- and Vail-based Holy Cross Energy, which owns 8 percent of the plant — commissioned an investigation into the plant’s operational problems
The results of the investigation have not yet been released.
Contact Gaby Zastrocky at email@example.com or follow at Twitter.com/gabriellereport.
Optional rate plan will be offered to 500 customers
IREA is starting a pilot program that will offer 500 residential customers much lower energy rates outside the peak usage hours of 4 to 8 p.m., general manager Pat Mooney said. In return, those customers would then pay a higher rate during the peak hours.
“If our customers are willing to not use power during that time, or pay a lot more to use power, we’ll give them a much lower rate during the off-peak time,” he said.
Residential customers who participate will be charged between 7 and 8 cents per kilowatt-hour throughout the day, rather than about 12 cents per kilowatt-hour. If they use electricity between 4 and 8 p.m., however, they’ll pay 30 cents per kilowatt-hour.
“There are some large savings that someone can realize if they actually think they can manage and are willing to make the effort,” Mooney said.
Ultimately, Mooney said IREA would like to implement the plan as an option for anyone who thinks it would work. This pilot program is a test to see what it looks like financially. In theory, it should have no impact on IREA’s revenue, but Mooney said it wants to be sure.
“We’re not sure how it’s going to affect our revenues, and we need to see it in action before we find out whether we’re going to be bleeding so much revenue from this type of plan that we can’t offer it to everybody,” Mooney said. “We want to have it available to people as an option.”
The pilot program also will include some commercial participants at different rates.
The program is available on a first-come, first-served basis, although Mooney said the system to start it is not yet set up. For more information, call IREA’s customer service line at 303-688-3100.