At the regular September Board Meeting, the WOEC Board of Directors discussed and approved restructuring the rate schedule and approved a rate increase effective October 1, 2013. We have heard and considered differing views and respect the right of each member to express their preference in an appropriate manner. We are not doing this because we like high rates, we are doing this as it is our considered position that an increase is required to meet our lender requirements, provide reasonable service and reduce future revenue requirements (less borrowing, lower interest on what we have to borrow based on our financial condition). We understand the hardships and frustrations that our members face, but we must make responsible financial decisions for the overall wellbeing of the Co-op.
The purposes of the rate restructuring were to: cover the increased costs from BPA to the wholesale power rates of 9% and transmission rates of 11%, cover the cost of debt service to the loans from the four storm events and resulting projects, increase the tree trimming to reduce outages and resulting overtime expense, rebuild the depleted reserve account for future storm events, pay for increased costs of goods and services to the co-op, and to increase debt payments in order to reduce debt load. Reducing the debt load will help bring the equity ratio back up to 35%, allow us to restore borrowing ability for future projects and/or maintenance, and stabilize or even potentially reduce rates in the future.
The rate schedule will remain a declining block rate but will change from a three tiered rate structure to a two tiered rate structure. The first tier will be from 0 to 1,500 kWh of usage and tier two will be from 1,501 kWh on. This was done to more evenly distribute the costs of maintaining and operating the system. There will be an overall rate increase of 14%, with part of the 14% being an increase on the base charge of $2 and the remaining portion of the increase on the kWh charge. The new Residential rate will be: Base Charge $37.00, Energy Charge 0-1,500 kWh $0.1385 and over 1,500 kWh $0.1051. (Please see our website at www.westoregon.org for the full list of rate schedules under the “News” tab, “New Rates Starting Oct 1, 2013”.)
There were several rate proposals for the board to consider regarding the setting of new tiers, whether to put no increase on the base charge, $2 or $4 (there was no proposal to the board to consider increasing the base charge to $67), and proposals that would increase rates in 2% increments. The board chose 14% instead of 12%, because it reduced the amount of time it would take to replenish the reserve account and pay down debt sufficient to restore equity ratios back to 35% from 4 years to 3 years, and potentially be able to absorb the next BPA rate increase in 2015. By going to 14% now, it will provide for rate stabilization and reduce some of the risk from future storm events going forward.
All of the reasons and objectives behind the need for the rate increase are sufficiently covered in the approved rate increase. It was noted by the board that it is all contingent on our ability to survive any future storm events of significant magnitude. This explains the urgency to replenish the reserve account as quickly as possible before another event occurs. If all goes well, the hope is that this will be the last rate increase for at least two years and potentially four years, again, if all goes well with Mother Nature.