growth means rising rates
Rapid growth on co-op lines is one reason
rates are on the rise
Speaking to members
of United Electric Cooperative during their annual meeting, Jim Jura
posed a question. Jura, the manager of Associated Electric Cooperative,
wanted to know how many members had more than one TV in their homes.
the entire audience raised their hands. They responded the same way
when asked about refrigerators. Most, it seems, had replaced their inefficient
refrigerators, only to move them to the garage or workshop where they continue
to run keeping drinks cold.
Jura and the board
at Associated, which supplies wholesale power to electric cooperatives
in Missouri and parts of Oklahoma and Iowa, have been carefully watching
the rapid load growth at electric cooperatives across the state. The
same thing is happening at Citizens Electric, the only Missouri cooperative
not on the Associated system. Manager Tony Campbell says Citizens has similar
issues and is looking for more generation through its supplier, Wabash Valley
Looking ahead, Associated’s
planners predict the energy requirements of the cooperatives it serves
will increase about 2 percent a year. That’s
enough power to supply about 30,000 homes a year.
is growing and it’s growing faster than we thought,” Jura
says. “No matter what we do, the system is growing so fast we are
going to need more generation.”
The number of electric
cooperative members has increased nearly 90 percent since 1985. Through
2025, the total number of new members is forecast to grow another 45
One co-op that has
seen tremendous growth is Platte-Clay Electric based north of Kansas
kind of slowed down now,” says Platte-Clay
CEO Mike Torres. “We
were seeing 850 new meters a year. Now this year we will probably
add 350, maybe 380. That’s probably a good thing because the
growth we were seeing, while manageable, was right on the edge of
manageability. We are getting a little breather now.”
in a pasture just outside Troy are surrounded by new homes. New
home construction in this subdivision, served by Cuivre River Electric
Cooperative, and other areas across the state is helping to drive
demand for electricity to record levels. Photo by Karen Stockman.
the state at Cuivre River Electric Cooperative, membership grew
from 46,000 in January 2006 to more than 48,000 a year later. Systems
that serve near Lake of the Ozarks, Table Rock Lake and the Springfield
area also saw huge growth in the past couple of years.
are there more members, but those members are using more energy than
ever before. Average use for residential, commercial and industrial
customers has increased 35 percent since 1985 and is forecast to
grow another 14 percent by 2025.
Driving that increase
is a plethora of new appliances and gadgets. Virtually everything you
buy these days — from
cell phone chargers to iPods to computer peripherals — comes
with a plug.
The number of
electric cooperative members who owned a computer went from just 14 percent
in 1993 to 60 percent in 2004, mirroring a national trend. The Environmental
Protection Agency Energy Star program estimates that home electronics
account for about 15 percent of all residential electricity consumed.
a 200 percent increase since 1980.
Air conditioner use
also has skyrocketed. Today, 90 percent of new homes have air conditioning.
And those units will be required to cool much larger homes.
to the 2006 census, the average single-family home had 769 more square
feet than it did in 1976. Thirty-nine percent have four or more bedrooms,
double the rate of 20 years ago. And 26 percent have three or more
bathrooms, almost three times the rate from 1986.
So not only are
there more houses being served by electric co-ops, they are also
larger and use more energy.
you priced a new Chevy in 1985, it was probably $14,000.
What would that same Chevy cost today? It’s
probably double. So how can we expect it to be any different
for a new power plant?”
Platte-Clay Electric Cooperative
In board meetings
across the state, this growth has caused concern among those responsible
for planning to meet member needs. “There’s a lot of
concern over capacity as we go forward and what steps
should be taken to plan for it,” says Torres.
The good news:
Your electric cooperative has plans in place to meet this tremendous
increase in demand for electricity. The bad news: New sources of
power will certainly cost more to build, and rates are expected
to increase in the foreseeable future.
current rate increases? For years, Associated had excess energy that
could be sold on the open market. Margins made on these sales helped
offset rates co-op members paid.
“When the system
grows, the members use up the low-cost generation,” Jura
says. “That’s fine, because these
generation units were built for our members.
But it does mean we will have to increase rates
a little faster because we won’t have the
margins from selling power off the system.”
factors that are driving rate increases include
dramatic increases in the price of fuel — especially
coal and natural gas — that are
used to generate electricity. Another issue
is the staggering cost of equipment that must
be installed at power plants to meet strict
new environmental standards.
In the short term,
new gas-fired units have been brought on
line that can add to the generation mix in times
of high energy use, usually on the hottest
and coldest days of the year. For example,
Associated purchased a mothballed power plant
in Dell, Ark., and completed construction
on it this spring.
Associated also contracted
to buy the entire output of the three wind projects being constructed
in northwest Missouri. The first of these,
Bluegrass Ridge, is already delivering some
power to members.
But in the long term,
Missouri cooperatives will need additional baseload generation which,
unlike wind power, can be relied on whenever it is needed. A new coal-fired
plant in the works for Norborne, Mo., is expected to cost $1.7 billion.
70 percent more than estimates from
two years ago.
The last large generation
unit built by Missouri’s electric cooperatives
came on line in 1982. Much has changed
since that plant was built, and these factors are driving costs for
new power plants through the roof.
“One way I
try to put these cost increases into perspective,” says
Torres, “is to compare it to
the price of a new car. If you priced
a new Chevy in 1985, it was probably
$14,000. What would that same Chevy
cost today? It’s probably double.
So how can we expect it to be any
different for a new power plant?”
cooperatives are not the only utilities
experiencing this combination of
high growth and sticker shock over
the cost of new generation. Utilities
across the country are in the same
electric cooperatives today enjoy some of
the lowest rates in the nation.
And that is expected to be the
case in the future, especially
with a new emphasis on efficiency.
a given we are going to have
rising rates,” Jura says. “Fuel
and construction costs are going
up. But if we can help members
use energy more efficiently,
it’s possible bills will
levelize and not go up that much.”