–by Chris Greacen, Ph.D.–
OPALCO plans to meet its burgeoning operating costs and debt payments through a new tariff structure with unprecedented increases in fixed charges. By 2019 the base rate will rise to nearly $78 per month before any electricity is used. This is particularly punitive to small users, including the elderly, those on fixed incomes, homes that practice energy conservation, and those with solar panels. To some, that’s not a lot of money. For others it means difficult choices between winter heat, putting food on the table, or dipping into life savings.
I sorted all OPALCO residential members into ten equal groups (deciles) based on how much each consumes and found that high facilities charges impact these groups very differently. The 10% that consumes the least electricity faces a bill increase of 132% to 171% by the year 2019, compared to what they would pay for the same amount of electricity in 2014. The next 10% sees an increase of 93% to 132%. Strikingly, the 10% that uses the most will see their bills increase only 14% to 21%.
Regulatory authorities around the country deny utility requests for high fixed charges. In March PacifiCorp (UE 140762) requested a base charge increase to $14 a month, from the current $7.75, and were denied by the Washington Utilities and Transportation Commission (WUTC). The Commission noted, “The Commission is not prepared to move away from the long-accepted principle that basic charges should reflect only “direct customer costs” such as meter reading and billing. Including distribution costs in the basic charge and increasing it 81 percent, as the Company proposes in this case, does not promote, and may be antithetical to, the realization of conservation goals.”
Avista (UE 140188) was granted a modest increase to $8.50 a month from the previous $8. They had requested $15. In California, facilities charges are capped at $10 per month. Southern California Edison charges 99 cents while Pacific Gas & Electric charges less than $5. OPALCO board member Bob Myhr asked, “what about utilities in other island areas, like Martha’s Vineyard?” Curious, I called up their utility, Eversource. There is no facilities charge.
These charges (even the ones that were denied!) are far short of the $78 a month we’re going to be hit with.
I don’t think OPALCO’s rate structure would have a prayer of being approved by the WUTC. But that’s a moot point because, as a coop, OPALCO is not under the WUTC’s jurisdiction. It’s up to us – the owner-members of OPALCO. Join me in requesting that OPALCO redesign its retail rate structure to make it consistent with long accepted regulatory principle with facilities charges based only on direct customer costs (metering and billing) and not distribution costs. Needed revenue can be made up through charges based on actual peak demand in a billing period, service amperage, or increases to “regular” energy charges (per kilowatt-hour).
We exercise our regulatory authority when we vote in OPALCO elections. This isn’t much of a lever, considering the nuances and the candidate pool. I encourage votes for Winnie Adams & Randy Cornelius and “yes” on the member-initiated bylaw change.
Explanation: The 10% of OPLACO members who consume the least electricity (decile 1) will see the highest bill increases. The range of winter bill increase (in year 2019 compared to 2014) for each decile is indicated by the black box graphs, while average consumption (kWh per month) by each decile is shown in the shaded bar graph.
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What concerns me most after looking at the new rate structure (which can be found on the OPALCO web site in a 1/22/15 memo from Foster Hildreth to the Board of Directors titled “Updated Rate Increase” is that large commercial users will experience only an 11.5% rate increase from 2014 to 2019, less than the rate of inflation, while the average residential user will endure a 40.3% increase. The monthly facilities charge for a large commercial user ends up only about 25% higher than than that for a residential user, despite the fact that the former uses almost 7 times the kilowatt-hours. What’s the rationale for this?
Here’s one of many examples of what the facility charge pays for…
https://theorcasonian.com/were-powerless-without-them
(in response to Jay’s comment…) Our linemen are first rate and make great sacrifices to keep the lights on under the most challenging circumstances. We have deep appreciation for them.
It’s important to not conflate their excellent service with the question of how cost increases are passed on to different customers and whether the rate structure is antithetical to energy conservation goals.
I agree. And I recall that Randy Cornelius began his OPALCO career as a lineman. He therefore understands this organization from bottom to top, that its primary mission — as stated in the Bylaws — “is to serve San Juan County by providing electrical utility service that is efficient, economical and adequate for our members.”
That’s why I’m casting my vote for Randy and urge others to do so, too.
Chris has conveniently conflated data to induce alarm in the membership over changes in the fixed charges. Yes, Opalco is increasing members’ base rate, and that cost will go up for most members by about $10 this year alone. However, usage rates are still pretty low.
He mentions the “burgeoning” costs driving the increases, and I’d suggest that the costs were there all along, blanketed by the high usage revenues historically earned in our winter months. When temperatures were warmer this winter, the proverbial blanket was kicked off, and the real cost of the system is now startlingly apparent.
If Chris correctly added a third line to his chart, he’d be reporting the fixed charges that will continue to rise to a level that allows all islanders to pay for the basic cost of delivering energy, and then distribute that energy across the 20-island chain. On top of that, islanders who have historically been heavy energy users will pay more, just as they’ve always done. More energy efficient users will also pay their share of the basic distribution (fixed) costs, and will see their benefits through lower kWh usage, that is, avoided costs, on their bills.
Lastly, Chris cites Eversource (www.eversource.com) as an example of a utility that doesn’t (directly) charge for fixed rates. If he’d dug a little deeper, he’d know that users were hit with a 29% increase in their rates at the beginning of the year. Search the web to read what their customers are saying about increases.
This is just another apples to carrots comparison that ignores the differences: Eversource serves over 1M customers, is for-profit, and typically separates their rate into two parts, delivery and supply. When the supply (source) goes up, as theirs did because of generation expenses, their rates surged.
Opalco? 11,200 member-owners living in a chain of islands where most members have depended on Opalco to supply energy for over 75 years from a remarkably clean and stable source, BPA. And that energy management and delivery is handled by a dedicated group of employees who live and work in the community. Yes, the cost has been significant and growing for some time, no question. The key issue, however, is how we have been covering those costs (inequitably through kWh usage rates) and how we will sustain our Co-op going forward, by collecting fixed costs equitably and directly through the facilities charge.
Opalco delivers clean, reliable, and mostly hydropower energy from hundreds of miles away on cables passing under a large body of water. Getting energy to the islands so that we can enjoy a great quality of life here is expensive. Who gets to pay for that? All of us, and in a method that fairly distributes the cost. And that means regardless of whether you use the power only at night when your solar panels are switched off, or during the summer when you are at your second home, or if you are a full time, year-round resident who may hold down multiple jobs to afford living in these beautiful islands.
Chris, your actions and words bely your praise of OPALCO’s “ excellent service.” You, Chom and others have continually underplayed the true value of the facility charge, which for decades has undercharged for the grid, facility, operations, customer care, energy savings department, renewable energy investments, design, engineering, maintenance – ad infinitum (see: https://www.opalco.com/wp-content/uploads/2015/04/Facility-Charge-True-Up.jpg). Those charges are shared by us all. Just like the highway – we all pay taxes for roads and ferries and such, regardless of how much we personally drive.
And the lack of transparency? What about when you fail to count the value you derive by using the grid/facility as a battery and to sell your grid-tied solar energy, at retail rates, to OPALCO. You, better than most, know the true value of OPALCO’s reliable grid/facility that meets the many needs of the membership. You fail to mention the benefit you derive by having a very low facility charge and high usage rates. Your benefit is on the backs of those members who don’t have solar to sell at retail rates.
The average member who uses OPALCO’s grid as a solar battery consumes about 700 kWH per month, more in winter when it is darker and there is much less solar. The vast majority of islanders with solar go with “grid-tie”, using OPALCO’s grid as a “battery”, because of the great value:
– saving the personal cost of expensive batteries and generators,
– avoiding the maintenance and repair needed with those systems,
– avoiding the costs and carbon footprint of fuel for the generator,
– selling their electricity at retail price to OPALCO,
– keeping the array small (and lower cost), and backfilling with OPALCO in the low sun heavy load colder months.
– having low cost, clean dependable OPALCO electricity at night and in the gray sunless days of winter.
– substantial time and money investments OPALCO makes supporting the MORE solar incentive program
– OPALCO investments in building community solar for schools and homes and business
What do you reckon the value of all that is? Express it as a dollars per month, or $/kWh?
It’s not clear what Suzanne Olson means by “Conveniently conflated”. I’m simply looking at what our electricity bills are going to be. Most folks aren’t interested in parsing out the different components of the rates because when we open our checkbooks what we’re paying is the total bill. I calculated future electricity bills for based on information on OPALCO’s website (see page 2 of https://www.opalco.com/wp-content/uploads/2015/01/Rate-Change-Materials-1-22-15.pdf). It’s true that it involves adding facilities charges to energy charges, but is this conflating? It’s just how OPALCO calculates our bills.
If you’re curious about your own bill in 2019, I encourage you to run the numbers for yourself. Take your electricity usage (“kWh” printed on a representative OPALCO bill) and multiply this by relevant 2019 tariff from the OPALCO website (e.g. $0.082/kWh if you use less than 3000 kWh in winter). Add the facilities charge & demand rate ($77.70/month in 2019). If you don’t use much electricity, you’ll find your bills are going to be a lot higher than they were in 2014. If you use a lot, your rates will go up, but not nearly as much when measured as a percentage of 2014 rates.
Casting aside for the time being the question of whether OPALCO’s high revenue needs reflect prudently incurred costs, I think most everyone agrees that given the existing situation OPALCO has a need for high and stable revenues. Charging every residence an identical high fixed charges is one way – an easy way – to obtain stable revenues. But is it aligned with what most members perceive of as fair or “right”? Would the Washington Utility and Transportation Commission (WUTC) see this as fair or acceptable? The WUTC denies high fixed charges as antithetical to conservation efforts. Members we speak with feel they’re unfair because they make basic access to electricity service unaffordable.
We see a number of other options that could be pursued individually or together:
1. Different fixed rates depending on service level (e.g. 400 Amp service pays more than 125 Amp service reflecting the fact that all upstream transformers and cables must to be sized based on cumulative service amperage);
2. Demand charges based on actual peak demand (or peak kWh in a 1-hour or 15-minute interval using AMR current meters); and
3. Zonal facilities pricing so that members on tiny islands pick up their share of increasingly expensive submarine cables. Even if these members pay initial costs, repairing and replacing these submarine cables that serve very small numbers of mostly seasonal customers is very costly.
Would OPALCO be willing to hold discussion forums so that interested members can help brainstorm potential solutions or learn from OPALCO why some ideas would work or do not work? Such forums would go a long way in promoting better understanding among the membership.
And finally, regarding Eversource (the utility that serves Martha’s Vineyard)… their rates went up because of steep increases in the price of wholesale electricity power. OPALCO is blessed with low wholesale electricity costs because of cooperative’s privileged access to a certain quota of cheap BPA power. Our bills are going way up — but not because the electricity OPALCO buys is particularly more expensive. And Eversources’ facilities charge of $0.00/month isn’t changing — which was my initial point.
Addressing Jay’s “lack of transparency” comment, I provide the following full disclosure: my family of four lives in a passive solar energy efficient home with solar PV in a high density area within Lopez Village. We admit to waiting for sunny days so we can hang our laundry on a clothes line rather than use an electric dryer. We turn out lights when we leave the bathroom. Even if we never had solar PV, we would still be purchasing less than 2700 kWh per year from OPALCO and we would be seeing an increase of about 101% in our electricity bills by 2019 if our consumption remained constant.
But this isn’t about our home or the lifestyle we have chosen. It’s about the 1100 members who will see an increase in bills at least 130% by 2019. It’s about the 2300 members who will see their bills increase by at least 90%. It’s about my neighbor who says, “I don’t think I can afford to stay connected if OPALCO bills go up that much!” It’s about the fact that OPALCO has adopted a rate structure that discourages conservation by making a maintaining a connection expensive but kilowatt hours cheap.
Jay uses the analogy of roads and ferries. But it’s not true that “we all pay taxes for roads and ferries and such, regardless of how much we personally drive.” Our roads and ferries are paid in considerable part through a $0.559/gallon tax we pay on gasoline and $0.619/gallong on diesel. https://www.api.org/oil-and-natural-gas-overview/industry-economics/fuel-taxes/gasoline-tax and https://www.dol.wa.gov/vehicleregistration/ftfacts.html. As it should be, the more we drive, the more we pay.
I’ve also been pointing out the reality that even when it comes to OPALCO’s fixed costs, it’s not a one-size fits all situation. Small users actually do have a smaller impact on the distribution network because OPALCO sizes its cables and transformers based on expected aggregated load. Users on remote islands impose considerably higher fixed costs than users in dense areas on main islands.
Ultimately, a good guide would be to follow practices consistent with Washington Utilities and Transportation Commission rulings even if we’re not under their jurisdiction.
I want to address a valid point that Jay brought up about grid-tied solar systems paying their fair share of the costs to reflect the benefits they derive from the grid. I agree that as a net-metered member of OPALCO (we have a 3 kW solar system), we should perhaps pay more for the distribution service (perhaps in the form of a demand charge or fixed charge tied to my solar system size or my peak usage?) than a residential member of comparable consumption with no solar system.
I however would like to also point out some of the benefits of local renewable energy (RE) generation that is enjoyed by the general membership and beyond, not just owners of the solar systems:
– reduced thermal losses in our local distribution system (surplus solar generation is well absorbed by the surrounding load)
– slowing the load growth (projected at 1% per year) which would push us into the more expensive Tier 2 electricity from BPA
– displacement of coal/gas-fired generation and thus reduced CO2 emissions
I support OPALCO’s acknowledgement of the RE benefits to the membership and the environment, and OPALCO’s recent decision to allocate $25k to fund the MORE Fund to incentivize more local RE generation.
I think we can come up with a fair way to get net metered members to pay for the “battery” service of the grid while members are still encouraged to invest in local RE generation.
I also hope that Jay and others do not use our personal lifestyle choices (conserving energy and investing in clean energy) as a distraction from the important issues that we raise about the rate increases.
Oh, one minor correction: Jay said that grid-tied solar systems are “selling their electricity at retail price to OPALCO.” Actually, we off-set our consumption on an annual basis and sell the excess generation to OPALCO at the wholesale cost of electricity from BPA plus one cent/kWh. If OPALCO pays 4 cents/kWh for electricity from BPA, it buys from local RE generators for 5 cents/kWh.
Chris, But you do have solar, and you have yet to acknowledge it’s value when you downplay the value of the facility. And you personally benefit from doing that. So what’s the answer to the question below?
The average member who uses OPALCO’s grid as a solar battery consumes about 700 kWh per month, more in winter when it is cold, darker and there is much less solar. The vast majority of islanders with solar go with “grid-tie”, using OPALCO’s grid as a “battery”, because of the great value:
– saving the personal cost of expensive batteries and generators,
– avoiding the maintenance and repair needed with those systems,
– avoiding the costs and carbon footprint of fuel for the generator,
– selling their electricity at retail price to OPALCO,
– keeping the array small (and lower cost), and back-filling with OPALCO in the low sun heavy load colder months.
– having low cost, clean dependable OPALCO electricity at night and in the gray sunless days of winter.
– substantial time and money investments OPALCO makes supporting the MORE solar incentive program
– OPALCO investments in building community solar for schools and homes and business
What do you reckon the value of all that is? Express it as a dollars per month, or $/kWh and kilograms of CO2 emissions.
Hi Chris G,
I can personally applaud you and your family and the choice to be prudent energy users. Seems like solar fits your needs pretty perfectly. However, I wouldn’t generalize my own family’s energy use, prudent as we are, to suggest others follow our pattern. We don’t live on a sunny part of the island, and have trees and a small land knob that effectively blocks out any sun from October through late March. We’d be paying a lot for solar panels that we might get to use a few hours of the day for a few months of the year, and would not see a reasonable return on our investment in our lifetime. But where solar works and fits into the lifestyle, land use, and pocketbook of an islander, great. That said, we’d likely subscribe to the forthcoming Community Solar arrays that Opalco and the Conservation District are partnering on.
For all my appreciation of your efforts, however, I ask that you and the other small energy users acknowledge the critical part that our infrastructure is for the electrical grid we all depend on. We can debate well into the next decade the numbers, your preferred rate structure, and how costs are allocated. But what Opalco faces is this: the rates have given part-time residents and grid-tied solar users a very good deal for a long time, paid for by winter-heating members. And that includes the low-income Opalco members who consume more than the average member.
The new rate structure and base facility charge is not designed to be any more punitive to those who are small users of the system than the old rate structure was designed to punish year-round residents. The Board studied many options, selected one to move forward with, and Opalco has begun to implement the change for 2015.
Also, you suggested that we hold public discussions on the matter of rates. We actually do that already, and we call them Board meetings, hold them monthly, publish the time and location, hold them on the three ferry-served islands to encourage wide participation, and they are open to our members. You, as a member, are welcome to come and propose solutions. At numerous Board meetings, your wife, Chom, encouraged the Board to adopt demand charges and higher usage rate for heavy users, both which are in the new rate plan.
The Board exercises its fiscal duties by reviewing reports and budgets throughout the year. As always, you are invited to attend those meetings. We welcome your input.
Theresa Haynie for OPALCO
Theresa,
You statement “At numerous Board meetings, your wife, Chom, encouraged the board to adopt demand charges and higher usage rate for heavy users, both which are in the new rate plan” is inaccurate. My idea of a demand charge is based on peak demand — the more peak kW you use, the more you contribute to the system cost. So very large users will end up paying more of the fixed costs through the demand charge because they are likely to require more of the system capacity than a small user. What OPALCO has adopted is a pseudo “demand charge” which charges everyone the same amount ($3/month/member) regardless of how much one consumes. Essentially this kind of “demand charge” is just another base rate or facility charge in disguise.
I did advocate for progressive block tariffs to minimize impacts on small users and encourage conservation. The approved rate structure did have slightly higher rates for higher consumption levels but the slight “progressiveness” of the blocks is countered by the very high base rate which make the overall rate structure very regressive – the opposite of what I was hoping for.
I’m glad OPALCO did take my inputs into consideration. My suggestions were however only incorporated in name, but not in spirit.
Chom, Any kWh you send to the grid is net-metered at the RETAIL rate. Any production kWh not consumed by you is paid out end of April, each year, for wholesale plus 1 cent.
I appreciate your starting to acknowledge that the facility/grid has value for solar grid-tie members. So let’s get specific. What is the value?
The average member who uses OPALCO’s grid as a solar battery consumes about 700 kWh per month, more in winter when it is cold, darker and there is much less solar. As you know, the vast majority of islanders with solar go with “grid-tie”, using OPALCO’s grid as a “battery”, because of the great value:
– saving the personal cost of expensive batteries and generators,
– avoiding the maintenance and repair needed with those systems,
– avoiding the costs and carbon footprint of fuel for the generator,
– selling their electricity at retail price to OPALCO,
– keeping the array small (and lower cost), and back-filling with OPALCO in the low sun heavy load colder months.
– having low cost, clean dependable OPALCO electricity at night and in the gray sunless days of winter.
– substantial time and money investments OPALCO makes supporting the MORE solar incentive program
– OPALCO investments in building community solar for schools and homes and business
What is the value of all that? Express it as a dollars per month, or $/kWh and kilograms of CO2 emissions.
Jay, can you clarify your question? “Value of all that” to whom? To people who invested in solar energy? To OPALCO management and staff? To OPALCO membership? To the planet?
I sense that you feel members with solar systems (including community solar for schools and businesses) are under-appreciative of the value that the electricity grid provides or don’t pay enough compared to the service of the grid that they receive. Is this the crux of your line of questioning? If that’s the case, it could be addressed in the design of the MORE and Community Solar program as well as the rate structure. If not, what am I missing?
Chom,
To the average member who uses OPALCO’s grid as a solar battery.
As mentioned above, they consume about 700 kWh per month, more in winter when it is cold, darker and there is much less solar. In the question above, I list all the things they would need to have and do if they didn’t have that facility. OPALCO facility/grid allows them to avoid all that.
What is the value of all that? Express it as a dollars per month, or $/kWh and kilograms of CO2 emissions.
Hi Jay —
We’ve never denied that OPALCO plays a valuable role in serving as a giant, 100% efficient “battery bank” that we can charge up in summer and discharge in the winter. Our arguments against the rate design are and were about their impact on the thousands of customers who use small amounts electricity and about the way they disincentivize conservation by making kWh cheap but access to the grid expensive. It wasn’t about the roughly 175 members who have grid-connected renewables.
I think that retired BPA transmission engineer Brian Silverstein’s and energy economist Jim Lazar’s idea of a minimum charge that includes an allocation of kWh is an excellent solution. It has net-zero customers like us paying more, makes part-timers pay their fair share, keeps monthly bills for low energy users, and incentivizes conservation by deriving more revenues from energy charges rather than facilities charges (consistent with WUTC rulings on these issues).
Answering your question about valuing all of the benefits of the OPALCO connection is, in my mind, equivalent to asking, “how high would the bill have to be for you to disconnect?” At some point we’d either leave to move to a place with more reasonable rates, or we’d disconnect and make a number of adjustments (wood stove, propane oven, batteries and different inverter to complement our solar array, etc.). Either would be a major undertaking.
But I don’t think it’s an appropriate question for a monopoly utility to be asking, especially a cooperative utility that we all own. It’s certainly not the right question on which to justify rates. The basic lesson from economics of monopolies is that monopolies shouldn’t be allowed to charge monopoly prices. Electric utility regulation has a long tradition of approving tariffs based on a number of criteria including meeting utility revenue requirements, distributing costs among customer classes, addressing needs of low-income customers, and encouraging conservation. Our point has been that OPALCO’s recent change in rates wouldn’t have a prayer of passing a regulatory review by the Washington Utility and Transportation Commission (WUTC) because it fails, especially on the conservation issue. But — as members should know – coops aren’t under WUTC jurisdiction… as members we are the ones guarding the chicken “coop”.
Hi – I’ve read this article and discussion with quite a bit of interest since I just spent a large part of the day investigating the 2015 OPALCO budget and calculating my probable electric bills in 2019 for my “single family residence” after the $77.70 facility fee is included. I agree with the article and the C & C Graecen comments about the rate structure. The 2019 facility fee alone is actually a 172% increase over the facility fee of 2014. If you look at the 2015 OPALCO budget document, the increase is described as a 9% initial increase with 6% increase thereafter until 2019, which implies a very different reality than a 172% increase in facility fees alone. The facility fee increase is reduced somewhat by a reduction in the kWh rate. I used the reduced kWh rates of $0.0780 from the 2015 budget document (different from the website rates used by Chris Graecen) in my calculations and it reduced the overall increase in costs. However, my costs increased 15% in a warm winter (electric heat) and 29% in summer. If it is a cold winter, I could see as much as a 46% increase in costs over 2014. Most of this increase, except in a cold winter, is in the fixed facility fee. In terms of absolute dollar amounts, I’ve also estimated my summer and winter bills. I am paying more now, but by 2019, on average, I will be paying at least $35 per month more unless it is a cold winter when I could end up paying as much as $100/month more than 2014. I have an old electric heat system, unfortunately, and I suspect that puts me in the higher use range for winter in particular. The end result of my calculations is pretty much in agreement with the estimates by Chris Graecen in his article although my numbers differ a bit because of my use of the lower 2015 budget kWh rate. I saw the higher rate on the website and I don’t understand why the website has a higher rate than the official budget document, nor do I know which one is correct. This rate increase will insure that I will reduce my dependence on any electricity as much as I possibly can and probably resort to wood as my main winter heat source as well as finding out ways to replace as many electrical appliances as I can. We all know that rate increases will not stop, it is just a question of how large they are and how often they occur, so this is just the beginning. Considering the amount of indebtedness OPALCO plans on incurring by 2019, I sincerely doubt this rate increase will be the smallest or the last.
Joyce, What is your average summer kWh usage and your average winter kWh usage?
Some things to keep in mind:
1. Though the rates have changed, many member bills are lower. That’s because of the continued warmer winters in 2015, repeating the winter patterns of 2014. So, because the electric rates have for years been weighted toward usage, and because usage is down, bills are smaller, and, OPALCO revenue is less. This is why OPALCO is truing-ing up the facility charge, to more accurately reflect the actual cost of delivering electricity and service to members around our 20 island community. And to make sure revenue is collected to maintain the facility to the standards members have come to expect, regardless of weather variability.
2. If you are “fuel shifting” to firewood, hopefully you are getting it for free, and burning it very hot to minimize pollutants. In general, electric heating is lower cost than heating with wood (at market price of $250 per cord) and much cleaner. Additionally, electric is much lower cost, and way cleaner, than propane and heating oil for heating your home and for water heaters.
3. Even with the new rates, electric is still the lowest cost, and very cleanest form of energy in the county. Another strategy you might consider is “fuel shifting” TO electricity. Since propane, heating oil, wood and gasoline are all more expensive than electricity, by concentrating your usage in the cheapest form of energy (electric), replacing the more expensive dirtier forms of energy, you reduce your overall energy bill, reduce your carbon footprint, and you average your electric bill down since you are getting more bang for your buck from your facility charge.
That’s what I do. Electric heater, electric water heater, electric car, electric mower, electric trimmer, etc. My electric bill is up a bit, and my propane and gasoline bills are down a lot. And my carbon footprint is much lower. When it is very cold out, I fire up my wood stove, run it very hot to minimize the toxins. As I improve the air seal and weatherization of my home, I expect that I generally won’t even need the wood stove fired up, except on the coldest of days. I will likely replace my old water heater with a heat pump version, and my resistance electric heater with a super efficient ductless heat pump. But first, I am focusing on reducing wasted energy. That gets the most bang for the buck, costing about 2¢ per kWh.
Jan Baxter – Sorry, I wrote Joyce, and meant Jan.
Jay – The specific amount of electricity I use is not relevant to my point. My point is that my bill will be 15% to 48% higher in 2019 than now assuming I have a similar use pattern and that the rate is at the 0.078 kWh rate. If the higher website kWh rates (0.0820) are accurate (which means OPALCO has already raised the “lowered rates” it had in its 2015 budget), then my costs in 2019 will increase between 21% to 52%. It’s just basic math. Using Chris Greacen’s chart, I would say that I am a bit below average in summer use and a bit above average in winter use.
In response to your “keep in mind points”
Item 1) With respect to some members’ bills being lower, mathematically, member rates cannot be lower if the set facility fee is higher unless they are using less electricity. In that case, the lower bill is due to reduced electricity use, not the rate changes. My calculations, on the other hand, were using the new rates and based on the assumption that I would be using about the same amount of electricity in 2019 as in 2014. While I can be happy for the people that are getting smaller bills, that does not represent my situation.
I don’t buy the argument that this rate increase was necessary because of a couple of “warm winters”. Weather fluctuates over multiple time frames and in my view any decisions made because of weather should be based on locally derived long term (decades) trends. I don’t see that type of basis for this decision. In writing this comment, I realize I have never seen any convincing explanation for why it was necessary to scrap the usage based rate in order to maintain the electrical service. You can, after all, raise additional revenues under the usage based rate structure by simply raising the rate per kWh. The result of the new rate structure, however, is that 30 to 40% of my bill will be for connecting to OPALCO and then usage fees will be added on top. In my mind that is a recipe for easily made and therefore potentially frequent rate increases.
Items 2 & 3) With respect to fuel shifting and whether electricity is cleaner or lower in cost, that is again, not directly relevant to my issues which are related to the financial and operational decisions being made by OPALCO, including the recent rate increase. In examining the 2015 OPALCO budget I found that electrical ratepayers are financing and/or indirectly subsidizing the broadband company in at least four ways, which taken together would pay for one submarine cable and part of another. In addition, over the next four years OPALCO plans to more than double its debt from about $24 million (just a bit more than ½ of equity asset value), to over $58 million which will put its debt obligations at $15 million more than its equity asset value. They will also more than triple their expenditures for installing OPALCO’s fiber optic backbone without which the internet company cannot expand/exist. And this is likely only the beginning since I believe that only one of the needed submarine cables will be replaced within that four year period. This level of debt and the significant increases in expenditures makes additional rate increases more likely in my view. While I can certainly hope my view is overly pessimistic, I don’t see any downside for myself in taking steps to reduce my use of electricity and thereby minimize my exposure.
OPALCO is providing financing to the internet company in part by taking out $7.5 million in loans “on behalf of” the broadband company but which ratepayers will have to repay should the internet company for any reason fail to pay. Repayment of these loans to OPALCO is scheduled to start in 2020 and ratepayers will be paying interest and principal for an unspecified amount of time. I believe this obligation is the source of the OPALCO management’s statement at the annual meeting that $3/month for an “average” member for 2 years was the only cost to ratepayers due to acquisition of and support to the internet company. However, in addition to the $7.5 million in loans, OPALCO is also providing $1.5 million in cash in financing through 2017. Repayment of the cash is not specifically covered in the budget. These two financing activities total to about $9 million through 2017, which is about 60% of the cost of the first submarine cable.
Ratepayers are indirectly subsidizing the internet company by paying for the installation and upkeep of a fiber optic grid that will link the internet coming from the submarine cable to the “last mile of fiber” being installed by internet customers. In the budget this is called the fiber optic “communication grid backbone” and while the installation has been ongoing and may be nice to have, it is not necessary to the provision of electricity. When revenues are tight, it would not significantly impact electrical service to reduce the rate of installation or even delay it until revenues are again available. In December 2013, $500,000 was included in the budget for this project, but this amount more than tripled to $1.7 million between December 2013 and December 2014. The internet company was purchased in October 2014 and unlike the electrical supply operations, it cannot exist/expand without this backbone. The amounts budgeted for this project have continued to increase and although the amounts have been moved around in various iterations of the budget document, it appears OPALCO has budgeted at least $11.3 million in various ways through 2017 for this project, which is about 76% of the cost of a submarine cable.
But perhaps the largest indirect subsidy given by the electrical ratepayers to the internet company is paying for the new submarine cables which is the way the internet arrives in the islands in the first place. The first submarine cable segment has been estimated to cost $15 million. No information is available in the budget documents for the costs of other segments.
Even though the internet company cannot exist/expand without the fiber optic backbone and the submarine cables, the budget through 2019 does not show any reimbursement from them to specifically pay for at least part of the installation costs nor any contribution to upkeep costs now or in the future for either the backbone or the submarine cables. I hope legally binding agreements for reimbursements and cost sharing exist elsewhere within the cooperative and were simply not referenced in the budget document. However, the need for a rate increase may indicate otherwise.
Using OPALCO’s projection of about 4600 connections by 2021 (less than 29% of the total census population of the county), their claim that it will “break even” and start to generate “profits” in 2017 seems optimistic if the true costs of the infrastructure installation and upkeep are recovered. An examination of the budget, however, shows only undifferentiated “returns” to OPALCO. It is logical that these returns are what is being called profits, but until an appropriate portion of the costs of installation and upkeep of the fiber optic communications backbone and submarine cables as well as other expenses are subtracted from these revenues, actual “profits” will be highly debatable.
In addition to the financial concerns, I also have what some might call a philosophical problem with the internet company. While it would be nice to have decent internet, I am particularly offended by a member owned cooperative rationing the access to and quality of the internet connection based upon ability to pay. To top it off, the speeds are less than impressive and the costs are very high. For example, Chattanooga, TN has a city owned broadband that provides 1 Gps (10 times the maximum offered here) at $70/ month and even the universally disliked Comcast provides 105 Mbps for $80/month. While one could assume that it will cost more to provide internet to the islands than Chattanooga, $180/month for 10 times less seems a very large difference, particularly considering that the internet company does not appear to have to pay for the installation of all the needed infrastructure. On the islands, electrical ratepayers and internet customers themselves are paying for a significant portion of the needed infrastructure.
Perhaps it was not clear from my comment, but my plans to reduce my electricity use are because of a desire to minimize my exposure to an organization that I am beginning to doubt will be able to meet my future energy needs at a price I can afford.
Jay, I hope this has clarified for you why I am planning on reducing my electricity use in the future as much as I can. Thank you for your concern about my use of firewood, but I already supplement my winter heating with wood. My winter electrical bills would have been much higher without the use of wood. Thanks also for your thoughtful suggestions. I definitely plan on continuing to explore additional options to better weatherize my house.