This article is the first in a series of communications we plan to share with members about proposed changes to the manner in which the cooperative charges for electric service.
At the end of June, you will receive a mailing detailing the proposed rates, their potential impact on you, where you can find answers to questions, and how you can submit feedback on the proposal.
In advance of that mailing, here is some information on the type of changes being proposed and the reasons behind them. First, some context. KEC’s cost of providing electric service has historically been among the lowest in the nation. This is possible because of our ability to purchase hydropower from the Bonneville Power Administration, our operation as a not-for-profit cooperative, and our internal focus on controlling costs and operating efficiently.
While all these factors remain true today, the cost of purchasing power during peak hours has risen dramatically over the past few years. Generally, members in our area are all awake and using electricity at the same time: getting ready for work, preparing meals, etc. This means that during certain times of the day, members are using more electricity than at other times.
For KEC, those peak times are 6-10 a.m. and 5-9 p.m.
Consider this: While the cost of purchasing or producing power on our members’ behalf has long hovered between 42 and 45 cents of every dollar our members pay in rates, the portion attributable to purchasing power during these peak periods (referred to as “demand charges” within the industry) has been steadily rising. Today, these demand costs represent 18% of our total power supply cost. Over the next three years, these demand costs will increase to 22.5%. In the past, demand costs were recovered through the energy use charge of our rates. With the increase in the cost to purchase power during periods of high demand, our rate structure similarly needs to be revised to recover these costs more equitably.
So, what is demand and what are demand charges? Demand (represented in kilowatts) is essentially a measurement of the maximum amount of electricity being used at one time. Demand charges are designed to recover the costs associated with building the electrical grid large enough to handle the extra power supply (the amount in excess of the norm) needed.
To ensure our rates remain equitable for all members, the proposed rate design will introduce a new billing element to certain residential and general service rates. It will be called “Peak Use Charge” and will be structured such that members have opportunities to minimize these charges by shifting consumption to non-peak hours.
It’s important to note that the proposed rate design and the introduction of the Peak Use Charge is structured to be revenue neutral for KEC, meaning that the total revenue collected from all members across the cooperative remains the same, even though the rate design has changed. These changes are expected to take effect with the January 2026 billings.
Under the proposed rate design, the majority of residential members would see a reduction in charges compared to the current rate design. However, those members who use electricity more heavily during peak hours, which contributes to demand costs, will see higher bills. Among these are members who use high electrical loads such as baseboard heating, air conditioning, water heating, or those who charge electric vehicles during peak hours.
Members can minimize the costs they experience by moderating their energy use during peak hours. For instance, programmable thermostats can be set to run heating and cooling equipment outside of peak use hours. Timers can be added to hot water heaters, pool pumps, and hot tubs to ensure they do not cycle on during these times. Laundry and dishes can be washed at different times from when meals are being cooked. Electric vehicles can be recharged at night. All these things help reduce load during these hours.
KEC is also exploring additional energy conservation offerings for members interested in lowering consumption and peak use, including battery storage systems.
Watch your mailbox in late June for more information about the rate redesign or visit our Proposed Rate Redesign page. KEC also plans to hold two workshops (a virtual and an in-person option) to help members understand the proposed changes and steps they can take to reduce their consumption during peak hours.
Sincerely,
Doug Elliott, General Manager/CEO
