At its March meeting, the ECI REC Board of Directors approved a modest 2.5% increase to the cost member-consumers pay per kilowatt hour (kWh). This increase will apply to usage in May and will appear on the bill received in June. The cost of a security light leased from the Cooperative will also increase 25 cents per month. The service charge will not increase.
Why was this rate increase necessary? Sales of electricity have been flat and ECI REC can no longer hold the line on costs. The recession and slow recovery has significantly reduced the demand for electric power, particularly by commercial and industrial accounts. ECI REC's kWh sales in 2011 were lower than in 2008. The Cooperative has been off setting the lack of revenue with cuts in operating expenses, which were actually lower in 2011 than in 2010. Over the past three years, operating costs are up only 3.4%. Contributing to these savings was the Cooperative's staffing level, which was reduced by two positions.
Could ECI REC have waited a year in hopes that the economy would improve and sales would increase? "Yes, but if we were wrong, the rate increase next year would probably have been larger. Our last increase was 7.1%. In retrospect, your Board believes it would have been less painful for members if we had spread the increase over several years. The board and I agree that when increases are necessary, we will follow the model of fewer, more frequent increases that allow members time to financially adjust," said ECI REC CEO Harry Ruth.
What if sales do increase later in the year? So far they have not. Sales through February are 3.5% below 2011.
However, if sales and revenue do unexpectedly increase, the Cooperative will lower member-consumers' rates by decreasing the Energy Cost Adjustment (ECA). The ECA is a way in which the Iowa Utilities Board, which regulates public utilities, allows cooperatives to pass along increases in our wholesale cost. "In the past, whenever your Cooperative made more money than needed to maintain its financial health, we have lowered the amount of your ECA. We have saved our members millions of dollars by not passing increased costs along to you when our margins were adequate without increase," said Ruth.
"Your Board understands that many of our members are still having a tough time making financial ends meet," Ruth continued. "Please remember that as a Cooperative owned by our members, we collect no more money that we need. When we do have to raise the rates, we try to make the increase as painless as possible."