LPEA Announces Rate Increase
Indiana Reed | 11/23/07
La Plata Electric Association’s Board of Directors gave preliminary approval for an average electric rate increase of 9.6 percent at their Tuesday, November 20 meeting. The average residential customer is expected to notice an increase of $0.01 per kilowatt hour (or $7.10 per month), effective January 1, 2008. Specific increases will depend on the rate classification of each residential, commercial and industrial customer.

The rise in rates is predominantly a result of a wholesale power rate increase of 11.7 percent from Tri-State Generation & Transmission, from which LPEA purchases its electric power, as well as some increase in LPEA’s cost of doing business. Though LPEA has tightened operating budgets, it is unable to absorb any of Tri-State’s increase. Approximately $8.2 million in additional funds is needed to meet local demand for power and maintain reliable electric service to LPEA customers.

In September 2007, Tri-State notified LPEA and its sister co-ops that it would raise the price of wholesale electric power on January 1, 2008. LPEA officials have been working steadily since that time to mitigate the burden on its member-customers to the best of its abilities.

“Gasoline prices have soared. Heating oil and natural gas prices are high. The last thing our members want to hear is more bad news about their energy costs,” said Greg Munro, LPEA CEO. “Despite the best efforts of electric co-ops across the country to hold the line, the monthly electric bills are unfortunately heading up.”

As Munro explains, Tri-State is raising rates to LPEA for a variety of reasons, the two most significant being the rapidly increasing demand for power and the construction of new electric power generation plants to meet that demand. As Colorado and the West grow, so do the requests for electricity. To satisfy the new and forecast demand, Tri-State is endeavoring to generate more.
Power generation plants, be they run by natural gas, coal, hydro, nuclear or biomass, are significant capital investments. The increased demand for raw construction materials throughout the world has necessarily increased construction costs.
“When demand for electricity exceeds the supply generated by Tri-State – which is currently occurring – the company must purchase the needed power in the open market,” explained Munro. “Just like any commodity, buying on the spot market is generally the most expensive option, and that supply is rapidly decreasing.”
With the current demand for power, Tri-State is in essence playing “catch-up” as it builds additional power generation plants. In years past when generation exceeded demand, Tri-State had extra energy to sell, and did so on the open market. During those years, LPEA members enjoyed lower electric rates – a luxury that is not likely to happen anywhere in the industry in the foreseeable future.

“As you can see, the rate increase is largely driven by issues out of LPEA’s control, even Tri-State’s. These are global issues,” said Munro. “We have entered a huge paradigm shift in the energy business. We all use that wonderful thing called ‘electricity’ and it has and continues to improve our lives in so many ways. But as we continue to use more and more, we must also use it more wisely and more efficiently. Though new power plants must be constructed in the next several years to meet the American demands, locally we will continue to engage in energy efficiency and demand side management efforts.”

According to Munro, 1% of LPEA’s annual revenues is already being focused directly on efficiency and demand side programs. Going forward this will potentially include allocating some funds in partnership with regional governmental agencies for sponsorship of 4CORE, a new organization designed to institute additional energy efficiency and sustainability programs. LPEA’s annual revenues exceed $85 million.

A mandatory 30-day comment period will be observed prior to the LPEA Board’s final adoption of the rate tariffs, which will take place at its regularly scheduled meeting on December 19. Every effort will be made to inform co-op customers. The increases for each rate classification will be delineated in display advertisements in local newspapers, inserts in LPEA bills and online. For further information, call 970-247-5786.

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