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The Co-op's New Challenges
Part 3: Rate Increase on the Horizon
By: Chris Reese, President & CEO
In the last two issues of Currents, I have been addressing the changes on many different fronts that have created new challenges for the Cooperative. This three-part series will culminate in this issue. If you’ve read the articles over the last two months, you’ve seen us cover the subjects of supply chain issues, rising material and fuel costs, storms, trees, and outages and learned how they’ve affected your Co-op. These all contribute to the topic of today’s article: a rate increase for the coming year.
Our current residential energy rate is about 10.9 cents/kWh, which is low. In fact, our rate is the lowest in the state of NJ compared to JCP&L, PSE&G, and other investor-owned utilities. A recent article in September 19, 2022’s Wall Street Journal stated the national average is 14.8 cents/kWh.
Part of our rate includes a System Connection Fee that is applied to all members to cover the expenses involved in maintaining an electric distribution system – our grid. The current standard System Connection Fee is $25.59. This is a fixed rate used by the Co-op to cover the expenses of maintaining the best possible quality of electric service and investing in improvements to our infrastructure, which includes things like wire, transformers, poles, labor, insurances, taxes, and more. In simple terms, this is the cost to be connected to our system, so that electricity is always available for you to use, whether you use one kilowatt-hour or one thousand.
We have not changed our energy rate or our System Connection Fee in over three years. Even through the pandemic, we did not raise them. We kept our rates stable while many other utilities did the opposite and raised theirs. In fact, when we opted not to have a rate increase in 2022, we budgeted for an operating loss. This was a purposeful decision that we made to show support for our members during difficult times.
Why Are Rates Rising?
As a not-for-profit cooperative, our goals are not geared around turning profits in order to earn a dividend for stockholders. We simply operate to provide reliable electricity to our 12,000 members as efficiently as possible – that’s it. In recent years we have been dealing with and absorbing cost increases and supply shortages for our materials, fuel, and equipment. Now, on top of all of those pressures, we are looking at a very large increase in the cost of power itself in 2023. Specifically, natural gas costs have skyrocketed this past year. While this only makes up about 20% of our power supply, the increase is staggering.
This rise in generation and transmission costs for 2023 makes an adjustment to our rate schedule inevitable. There is no one “villain” to this narrative, whatever you think it may be: the coronavirus, the war in Ukraine, inflation, etc. These are all contributing factors that have added up to put us in this situation.
We have a system to reinvest our margins into our company, and these funds are eventually retired as capital credits and returned to members. When making changes, we carefully consider how high our rates need to be to cover the costs of providing consistent, reliable, and safe electric service to our members.
What Is the New Rate?
You may be asking, with all this discussion of a looming rate change, what will the new rates be?
We do not yet have the final figures in place, but we still wanted to give all of you in our membership advance warning of what is to come. You should expect an overall bill increase in the range of 15-20%. At minimum you will likely see at least a $5-$10/month increase to the System Connection Fee, along with an energy rate increase in which, depending on how much electricity you use, the amount will be higher proportionate to your consumption.
At the time I’m writing this column, we are still working on our new rate schedule. This is an ongoing discussion amongst the Cooperative’s staff and our board of directors, and we will share more specific information with you all before the end of this year. The rate increase will most likely take effect in January 2023.
How Will This Affect Me?
We understand that any change made to our rates can have a large impact on members experiencing financial difficulties. On that front, we are sympathetic. We want to assure members that there are options like levelized billing to help qualified members catch up or keep up on their bills. You can also visit our website and review ways to save on your bill at www.sussexrec.com/ways-to-save.
There are also state-run services such as LIHEAP that exist to help citizens of New Jersey afford their utility bills. Applications for LIHEAP are open now so if you are concerned about your ability to pay your bills, I recommend you visit www.sussexrec.com/assist for more information and details on other available programs.
Our mission remains to provide the highest quality service at the lowest possible cost. We cannot continue to provide that same service to you all, or make improvements to face today’s many challenges like rising power supply costs, supply chain shortages, economic inflation, massive amounts of dying trees, or an increase in storms and their severity, without this rate increase. For better or for worse, this is literally “the cost of doing business.”