September 2009

Rate Increase Update

Dear Member:

 

A few months ago on this back page, I informed you that the Bonneville Power Administration (BPA) would likely need to increase power rates. In late July, BPA announced that it will increase power rates by 13% (7.5% wholesale power + 6.5% look back credit) beginning October 1, 2009.

According to BPA, the primary causes of the rising costs are:
• Improved Safety and Reliability of the Columbia Generating Station Nuclear Plant
• Court-ordered Fish Enhancement Projects
• Poor Water Conditions for Hydropower Generation
• Costs for Integrating Wind Power Generation

With this much of an increase, Midstate Electric is forced to impose a consumer rate increase to meet the increased costs. So, after more than sixteen years with only one adjustment, members will see a general rate increase of approximately 9% effective October 1. The rate increase last experienced by our members was also driven by a substantial increase in BPA’s power rates to the cooperative.

The rate stability you have enjoyed did not happen by accident. Midstate Electric’s rates have remained unchanged since 2001 because of the prudent business practices and careful resource management we had, and continue to have in place.

Along with the rising cost of equipment, material fuel, insurance and other expenses, there have also been changes in the cost of wholesale power since 2001. Your Board of Directors elected to absorb those increases rather than passing them on.

Over the past few months, the Board has been reviewing the impact of BPA’s increased power costs and exploring several different options to determine the most equitable means of spreading costs evenly to all consumers. The general rate increase of 9% reflects the increase in BPA’s power costs and the rising cost of distributing power to the consumer.

We are greatly concerned about future rates. Beginning in October 2011, BPA may initiate another rate increase due to the limited amount of BPA cost-based power—Tier One Power. Midstate Electric will have to acquire additional power over the Tier One Power allocation at a premium. Federal cap and trade programs may also increase the cost to operate the cooperative by 20-30%. These outside influences are quite frustrating because we work hard to keep our costs as low as possible.

You will receive more detailed information about the rate increase by mail in early September.

Bill A. Kopacz
General Manager

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