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Proposed 2020 Rates

Proposed Change in the Rates and Tariffs of San Miguel Power Association

San Miguel Power Association, Inc. (SMPA) proposes to increase its access fee. For most residential consumers, the increase will amount to approximately $1 per month (or $12 per year) above the current charge.  The updated fee is proposed to take effect January 1, 2020.  Consumers will make their first payments of the new fee in February.

While consumers’ variable electricity use is billed via a separate per kilowatt-hour (kWh) rate which is proposed to remain flat in 2020, SMPA’s access fee is a fixed charge assessed regardless of how much energy a particular consumer may use, and it covers the costs of maintaining vital equipment and infrastructure.

In recent years, SMPA has been making significant system reliability and infrastructure improvements.  The next reliability project, the Red Mountain Line Re-build will be the most expensive in SMPA’s 80-year history, and an increase in fixed infrastructure cost recovery is recommended.

SMPA strongly promotes energy efficiency and the use of renewable energy. Recouping fixed costs with a fixed fee is better for the overall movement toward energy efficiency. Because the co-op is not having to rely on volatile energy sales, it is in a better position to promote efficiency and renewable energy. 

The approved budget calls for a proposed access charge increase of $1/month for single-phase, non-demand, which is 93% of our meters. A commensurate 5% increase is proposed to apply to the access charge for the other rate classes as well. (See the chart below.)

 

 

For More Information:

Proposed Access Fee Increase Press Release

Notice of Proposed 2020 Rate Re-Structure

 

 

Rate Hearings:

Before the SMPA Board of Directors votes on the proposal, they are seeking comments from the consumer-members of SMPA.  Two rate hearings have been scheduled before the regular Board Meetings on November 19th, 2019 at the SMPA Office in Nucla (170 W. 10th Ave.) and on December 18th, 2019 at the SMPA Office in Ridgway (720 N. Railroad St.).  Both hearings begin at 9:00 AM.  Consumers are encouraged to attend one or both of these meetings, to ask questions, share opinions and help Board members make the most informed decision possible. Members may also submit written comments or questions to rates@smpa.com.

 

Frequently Asked Questions:

How much more will this cost me on my bill?
Although the energy rate is staying the same, the access charge is proposed to increase by approximately $1 per month or $12 per year above the current charge for most residential consumers.  The proposed increase differs for each rate class.  Please see the chart to locate yours.

 

What is the access charge vs. the energy rate?
The energy rate is an amount charged per kilowatt-hour (kWh) of electricity.  The billed amount varies with the amount of electricity used each month.  The current rate is $0.134725 per kWh.  There will be no change to this rate next year.

The access charge, however, is a fixed monthly fee that each member must pay regardless of how much energy they use.  This fee covers costs that SMPA incurs even if it sells zero kilowatt hours. It is used to recover expenses such as:
• Trucks, wires, transformers, power poles and labor needed to build and maintain the electric distribution system
• System investments that improve both capacity and reliability
• Insurance, interest, depreciation and taxes

Proposed increases to this component of the bill are defined by a member’s rate class.  Please see the above chart to locate yours.

 

When does the increase take effect?
The change is proposed to take effect January 1, 2020.  Consumers will make their first payments of the new fee in February, when January’s electricity use is billed.

 

Why does SMPA need to make this increase?
Over the last decade, SMPA has put specific emphasis on projects that would enhance the reliability of the system.  Recently completed reliability projects include system upgrades in Nucla, Norwood, Mountain Village and Telluride.  These projects have been built as the cost of doing business, including costs of materials, tools, labor and services, have been continually increasing.

Soon, SMPA expects to begin work on the single most expensive system upgrade in its 80-year history.  The Red Mountain Line Re-build will replace a power transmission line—some parts of which are nearly 120 years old—in some of the most rugged and treacherous terrain the United States.  The current line crosses the Red Mountain Pass and serves Ridgway, Ouray, and surrounding parts of Ouray County, which is the fastest-growing county in SMPA’s service territory.  

As a member of Tri-State Generation and Transmission (Tri-State), SMPA is entitled to pass on nearly half the cost of this improvement to Tri-State.  As a non-profit cooperative, SMPA will also access low-interest loans available from the U. S. Government.  Even with these economic boosts, the projected cost of the re-build is substantial.  Economic participation is one of the founding principles of a cooperative, and it is fitting that the membership of SMPA bear some of the cost of this project, and related reliability improvements.


Are you giving out member dividends?  Why not use that money to avoid the fee increase?
The SMPA Board of Directors has decided to distribute member dividends at the end of December.  The distribution of member dividends is another foundation of the cooperative business model.  It is the return of capital that was invested by members and allocated to them after the books were closed in a given year.  For SMPA, this represents a debt—no less legitimate than any other bill that must be paid by the cooperative in conducting regular business.  SMPA pays its debts.

On the other hand, the access charge increase represents SMPA’s projection of what costs will be in the future—given present and predicted circumstances—and the Board of Directors’ decision on how best to recoup those costs, moving forward.

Even if this year’s total member dividend distribution were to be, somehow, applied to the upcoming financial burden of system improvements, maintenance and business costs.  It could only be used to temporarily delay a bill increase.  Given these facts, it makes more sense, simply to return the money to the member-consumers.

 

Doesn’t a high access charge reduce the incentive for consumers to be energy efficient?
This is a point that the Board of Directors must consider carefully.  SMPA currently promotes energy efficiency among its member-consumers but it recoups many fixed infrastructure costs through electricity sales (which would naturally fall as members become more efficient).  
As long as the billing is structured this way, SMPA is at risk of reducing its own revenues to a level below what it needs to operate.
On the other hand, if SMPA recoups fixed costs with a fixed fee, it is free to promote energy efficiency, net metering, and renewable energy without the risk of financial insolvency.
Additionally, numerous rate studies have shown that our current access charge is far below what it should be.  This situation is inherently unfair.  Under the current system, large energy users (many of whom fall into a low-income profile) subsidize those who use less energy (many of whom are wealthy enough to afford efficiency upgrades).  Putting fixed costs back into a fixed fee also reduces this inequity.


Aren’t infrastructure costs already covered by those who pay to extend the lines?
SMPA’s policy is for load growth to pay its own way.  In accordance with this policy, those who wish SMPA to extend power service to new areas, must pay the initial costs of building that infrastructure.  However, once the lines are built, they become the property of the cooperative.  All infrastructure requires ongoing maintenance and the cost of this maintenance is born by the cooperative.

 

Is this increase driven by Tri-State?
SMPA’s wholesale power provider, Tri-State Generation and Transmission (Tri-State) has not imposed a rate increase for 2020.  
SMPA’s proposed access charge increase is driven in part by anticipated costs for SMPA’s reliability projects, including the Red Mountain Line Rebuild.  (See the fourth question above.)

 

When was the last increase? Will there be more? When?
There was a rate increase in 2018.  The access charge increased from $18 per month to $20 per month, and the energy rate remained the same.  Although the proposed 2020 access charge increase moves closer to a balanced ratio, it still does not truly cover all fixed costs.  The SMPA Board of Directors reviews rates each year.  Member-consumers are encouraged to stay informed by reading their monthly newsletter and by attending SMPA’s Annual Meeting in June.

 

How can I reduce my bill?
The access charge is fixed, but there are many actions member-consumers can take to offset the increase with a lower energy charge.  These can range from simple home projects like caulking windows and replacing incandescent light bulbs with LEDs to more involved ones, like insulation or replacement of appliances.  SMPA offers numerous rebates to help with these types of upgrades.  Advice on these efficiency projects is available here.
Many members in SMPAs territory are reducing their total monthly budget with the replacement of a gasoline-driven vehicle with an electric vehicle (EV) or other electric device that may increase the electric bill slightly, but which eliminates other monthly expenses in order to realize a net savings.  Please call (970) 626-5549 if you are interested in exploring options.

 

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