VEC raises rates to offset higher costs from TVA
Volunteer Energy Cooperative (VEC) customers began paying 2% more on their electric rates on April 1. VEC passed this increase along to customers to offset additional costs VEC is paying to purchase electricity under the Tennessee Valley Authority’s (TVA) new rate structure.
VEC has also reformatted the bill that residential customers receive in order to provide as much information as possible about how their electric bill has been calculated. VEC will continue to break out TVA’s Fuel Cost rates as an individual line on the bill.
TVA is charging VEC a higher rate for power that is used during the summer peak season and lower rates during the other, off-peak seasons. TVA designed the rate restructuring to be revenue neutral but some individual distributors will be paying less under the new rates and some distributors – such as VEC – will be paying more.
VEC’s rates do not reflect time of use pricing in which rates change according to the time of day.
TVA’s new rate structure also shifts fuels costs that were previously included in their base rate to the Fuel Cost rate. Previously the Fuel Cost only included fuel costs that were higher or lower than budgeted amounts. Now, all fuel costs are included. Part of the Fuel Cost charge is fixed according to TVA’s budgeted fuel costs. But a portion of the Fuel Cost will still be raised or lowered monthly depending on whether TVA’s actual costs are higher or lower than their budgeted costs.
VEC does not receive any of the funds collected by TVA through the Fuel Cost.
The new bills and rates also reflect an 11-cent increase in the residential customer charge from $11.60 to $11.71. This increase is due to TVA’s reduction in the residential hydro credit. Previously TVA credited each residential customer $1.71 on each bill as a hydro credit. Under TVA’s new rate structure the hydro credit has been reduced to $1.60.
VEC’s operating margin has been shrinking over the past several years as directors and management have made every effort to absorb higher costs from TVA as much as possible.
About 15 years ago VEC sent about 76 cents of every dollar collected from customers directly to TVA to pay for electricity. At that time VEC used the remaining 24 cents of every dollar collected to build, operate, and maintain their electricity distribution and customer service systems. Today VEC sends about 82 cents of every dollar collected directly to TVA to pay for electricity and retains only about 18 cents upon which to operate.
The net result is that VEC is operating on 25% less money.
“We’re using technology such as automated voice response systems, automated meter reading, and monitoring systems to keep our operation costs in check,” said VEC President/CEO Rody Blevins. “We are also consolidating some functions such as telephone contacts and dispatching in order to avoid costly duplication.”
But Blevins added that in spite of lower operating margins VEC has managed to cut costs even while taking a more aggressive approach to right-of-way clearing and pole inspections over the past few years. Blevins said this proactive approach to system maintenance is paying off with fewer outages and shorter outages already.
“We are beginning to see positive results from these programs and we expect those results to continue improving,” Blevins said. “Even though we experienced a great deal of damage and outages during last Wednesday’s storms, the situation would have undoubtedly been worse had we not been as aggressive with the preventative measures we’ve been taking.