Rates Adjustments Explained

A rate study is a detailed analysis to ensure the way that OPALCO bills the membership is fair and fits with the cooperative principles. As a nonprofit electric co-op, OPALCO is a cost-of-service organization, meaning we only collect as much money as is needed to cover our business costs. Any extra money collected is returned to members via capital credits.

A cost-of-service-analysis (COSA), determines how much it costs to provide service to each member class (e.g., residential, commercial). The results of a COSA guide the development of equitable and cost-based utility rates.

Since the last study there has been a shift in energy usage – there is more residential load and less commercial. This means that commercial members are now subsidizing the residential member class. The COSA methodology for cost categories was shifted to better align with standard practices. Based on this, it was suggested that the residential rate could be modified to better cover costs and improve revenue certainty which will more fairly recover costs. A residential demand charge could recover these costs while limiting adverse effects to small energy users, or OPALCO could increase the monthly fixed charge. OPALCO’s current infrastructure does not support demand charges for residential users, so this change would have to be implemented at a later date, if the team decides to move forward with demand charges.

Rate designs have a variety of trade-offs. A few key principles play an important role, including:

• Recovery of total revenue requirement, making sure OPALCO can cover all its costs
• Fair allocations of costs among members
• Price signals that encourage efficient use
• Easy to understand by members
• Practical and cost-effective
• Rate and bill stability
• Energy affordability for low-income members
• Support for electrification efforts as members move away from carbon-based fuels

The energy market is always changing—the current change is driven primarily by the efforts to transition to renewable energy. Factors to consider include:

• Clean energy is not available at certain hours throughout the year.
• It is a priority in our region to switch to electricity rather than using carbon-based fuels for heating and transportation.
• Charging more for using more energy is a barrier to achieving electrification goals.
• Price signals and covering high fixed costs are part of a renewable energy future.

Factors that are unique to OPALCO are low-cost power from the Bonneville Power Administration, costly submarine cables, limited year-round solar resources yet high rooftop solar adoption, large hydro resources mean there is not much value in energy load shifting within any given day, and large share of seasonal homeowners who are gone when OPALCO recovers most of the revenues in winter months.

Demand charges are added to bills based on a member’s peak demand. It reflects the maximum amount of power a member uses at any one time during a billing period.

This fee will be based on meter size. Most residential users have a 200-amp meter. For anyone above this, they will accrue a monthly fee: $10 per month for 400-amp services and $20 per month for meters larger 600-amps.

Clean energy is not available at certain hours throughout the year such as the nighttime and when the wind isn’t blowing which could mean that electricity prices go up during those times.

It is a priority in our region to switch to electricity rather than using carbon-based fuels for heating and transportation. Charging more for using more energy is a barrier to achieving electrification goals.

Price signals and covering high fixed costs are part of a renewable energy future.

The future rate design needs to ensure all members—including seasonal and rooftop solar members—fairly contribute to the fixed costs of the grid, support the financial health of the utility including during warm winters when sales are low, and maintain affordability for low-income customers.

OPALCO has two energy assistance programs that members can access. Energy assist is a monthly bill credit and Project Pal is a one-time grant offered to members who need it during the winter months.

Here is a link to the Energy Assistance Program: https://www.opalco.com/account-services/energy-assist-program/.

Here is a link to the Project Pal Program: https://www.opalco.com/account-services/project-pal/.

Costs are going up and with that our rates need to go up. Every expense is carefully considered each year to ensure we are making best use of member resources. The main reason rates are going up are inflation, the rising costs of power and labor, and to manage the Co-op’s equity position. As a nonprofit electric cooperative, we use equity to borrow federal funds to build essential capital projects, like the multiple submarine cable replacements that are scheduled over the next 10-20 years. Rate increases are predicted for the next five years.

The Member Services portion includes billing, payments, customer service, 24/7 outage and customer management, mailing fees, and more. OPALCO is incredibly proud of our highly efficient and capable member services team who serve over 11,000 members and deal with millions of dollars each month in billing and payments. Without them the co-op simply could not operate.

This portion of the charge relates to OPALCO’s capital equipment including high-cost submarine cables that are paid via low-interest federal loans, substations, and other capital expenses that keep the grid reliable.

This includes taxes, insurance, IT, accounting, legal, management, employee benefits, advertising, and other annual business costs. This area isn’t very interesting but is needed for operating the day-to-day business operations.

OPALCO has a top-notch linecrew that works 24/7 in all weather conditions to keep our power up and running. This includes regular maintenance and replacement of the system to keep things working. This also includes the engineering and mapping team that designs and plans the system that serves 20 islands.