Guest Column: Rates and Revenue Stability for Sustainability

— by Foster Hildreth, General Manager, OPALCO —

Despite real hardships across the membership, this rate structure is the right thing to do for our Co-op. The rate increase took effect in February and we are fielding questions and hearing about concerns from our membership.

The rate increase is necessary to maintain the financial health of our cooperative during a time that OPALCO is responding to a number of significant changes including warming temperatures, expensive submarine cable projects, shifting energy-usage patterns and grid control backbone expansion to meet near future needs. It no longer makes sense to have 75% of our fixed costs recovered through energy usage (kWh charges) because it leaves the Co-op vulnerable to revenue shortfalls, as we experienced in 2014.

The new rates gradually shift fixed-cost recovery to the facilities charge over the next seven years. We recognize that this is a big change and we are spreading the impact out over time to incrementally achieve our goal. Each year, as the facilities charge carries more of the cost, the energy charge will also adjust down until it reaches the goal of 25% of our total cost with 75% in the facilities charge.

The new rate structure is based on a cost-of-service study to make sure that each member pays their portion of the system costs. Parity is the foundation of a co-op. We conduct a cost-of service study every three years to analyze each member class’ (e.g. residential, commercial) impact on the system and match that with a rate to accurately assign costs. In this way, each member pays their actual cost of service; no member subsidizes another.

Every member benefits from the infrastructure regardless of their energy usage. It is very expensive to run our Co-op and serve 20 islands. Night or day, warm or cold, the power flows from the hydroelectric dam source, travels overhead to Anacortes, through submarine cables, along miles of buried cables, in and out of substations, transformer and voltage regulators and out to members’ homes and businesses.

Our co-op staff and line crews are on board full time to ensure safety and cover emergencies. These are the people dedicated to monitoring and controlling our power, maintaining and repairing our system, taking your phone calls and processing billing. Our whole system is built to handle a maximum load; we all pay into rates designed to recover these fixed system costs regardless of our usage.

Our grid control backbone is preparing us for a future we can already see. Since 2000, OPALCO members have paid, through rates, for the grid-control backbone that controls and monitors our automated electric system. This fiber optic system also allows us to integrate local solar power, electric vehicles and connect and manage the thousands of smart homes and devices that will be standard in the near future. We are readying our Co-op for a future we can already see. And, the expansion of the grid pays for itself. The efficiencies and capacity we gain offset the expense.

A small start-up investment in Rock Island Communications will pay dividends for years to come in revenue and member benefits. The acquisition of Rock Island give us a way to share our member-owned grid control backbone with more and more of our membership for a small, short-term investment of$3/member/month for up to 24 months. The revenue generated by Rock Island will repay the loan to OPALCO and can help us pay for our fixed costs, funding capital projects like submarine cables outside of rates.

Members can cushion the impact of the rate increase on our most vulnerable members through donations to Project PAL. While the co-op rate structure is built on parity, we know that there is a large wealth gap in San Juan County. This increase affects the affordability and quality of life for members who already struggle to pay their power bills and amplifies the need for cooperation among members. OPALCO contributed funding to PAL in 2015 and will conduct a needs assessment to analyze the effectiveness of the program. Members who can: please round up your bill, make a monthly or one-time donation to PAL.

Concern for community is the seventh cooperative principle, but is foremost on my mind as we navigate this rate increase. We hear your concerns and understand that rising costs—not just in members’ power bills—are difficult to accept. OPALCO’s leadership is making decisions today to protect the financial health and sustainability of our small rural electric cooperative into the future. It is not easy but we must stay the course and keep the power flowing to our island communities. We will get through these challenging times by working together, by taking care of our own.
Connect with us: www.opalco.com, on Facebook (Orcas Power & Light) and on Twitter (@OrcasPower). We are listening.