We have spoken for years about the factors that drive rates, mainly low densities and the high cost of maintaining an aging electric system. This year, the factors have expanded to include record-high inflation, increasing interest rates, and a volatile wholesale power market. The combination of these factors will have a negative effect on 2023 rates.
Expenses have increased dramatically due to inflation and interest rates. We have seen a substantial price increase in virtually all materials needed to maintain the electric system, and we now pay more for the money required to make system improvements. We have made every effort to reduce costs and manage inflationary pressures, but still, there is a need for a rate increase. Without diligence in managing expenses, a more significant increase would have been needed.
Effective in February, rates will increase an average of 3%. This increase will be implemented as usual with slight adjustments to three of the four components in our rate design, the facility charge, delivery charge on kWhs used, and the demand charge. For most of you on Rate A (residential), some 97% of all bills, there is no demand charge.
The fourth component in our rate design is Purchased Power. Purchased Power is the power we purchase from our supplier, Prairie Power. We have no control over its price. We fl ow through Purchased Power directly with no markup. When we announce a rate increase, it’s important you understand that we are referring to the three components that we can control, the facility charge, delivery, and demand.
In past rate announcements, we have not mentioned Purchased Power because Purchased Power was very stable. This year, due to inflationary pressures and a volatile capacity market, Purchase Power will increase. I want to be very open and transparent about the total increase you will see. Although the increase in the facility charge, delivery, and demand will be 3%, you will also see a modest increase in Purchased Power. The combination of the increase in Purchased Power and Illinois Electric’s increase will equate to roughly 5%.
If you have any questions about rates, please give me a call. A complete rate schedule can be found here.
Randy B. Long,
Illinois Electric Cooperative
For more on rates, as well as the risk of rolling blackouts, see General Manager Randy Long’s presentation from our fall member meetings below.