News > CEO’s Message – April 2023

CEO’s Message – April 2023

Board Approves Rate Adjustment

After careful consideration, the Stearns Electric Board of Directors approved an effective rate increase of 7.2% during its March 30 meeting to address the impact of inflation on the price of energy and critical electrical distribution equipment. The decision comes after an independent consulting firm conducted a comprehensive Cost-of-Service study which determined that a rate adjustment is needed to maintain our priorities in the reliability and quality of service for members.

One of the most fulfilling parts of leading an electric cooperative is that we are guided by service to our members rather than profit. We only raise rates when necessary to maintain the integrity of our operations, which allows us to focus on the quality of our service to you, our members and owners.

We understand that these are economically difficult times for our communities and members. Since this is the first time Stearns Electric has adjusted rates since 2018, I want to take this opportunity to explain the reasoning behind the upcoming rate increase and what changes you can expect to your bill.

COST-OF-SERVICE STUDY
As our Cooperative’s membership has grown, so too have costs for wholesale power, maintenance and materials. In response to these challenges, board members commissioned a Cost-of-Service study to determine the level of revenue needed to maintain the quality of the Cooperative’s distribution system. This process has been used prior to all previous rate adjustments to ensure any changes to rates are made equitably across all of the Co-op’s rate classes.

The study concluded that a revenue increase of 7.2% (approximately $4.8 million) was needed to avoid making cuts that would undermine our ability to meet service goals and support ongoing investments in the quality and integrity of our electrical distribution system.

Board members reviewed and discussed various rate adjustment options and chose what they believe is the best plan that balances the impact on our members with the need to maintain our financial stability, ongoing operations and investments.

RATE ADJUSTMENT
Beginning May 1, 2023, the Fixed Charge for the General Single Phase rate class, which includes the majority of our members, will increase from $24.75 to $34.25, an increase of $9.50 per month. This includes residential, seasonal and small commercial or agricultural accounts, which constitute over 95% our membership.

The monthly Fixed Charge covers our costs for delivering electricity – including labor, maintenance and repairs to distribution infrastructure. These costs exist no matter how much energy members use, which is why the charge is fixed and equal for all members within each rate class.

Included in this Fixed Charge increase is $3 per month to support the construction of a new headquarters for our Cooperative near our current Melrose location. More information on this project and how it will improve our operations will be outlined in a future blog or can be found on page 6 of the April Power Connection.

In addition to the Fixed Charge increase, there will be a small increase to our energy rate. The result of these adjustments means that an average member will see a monthly increase of approximately $14.30 per month, or about 10.1%. It is important to note that the total increase for individual members will vary based on energy usage, as well as taxes and fees specific to their location.

Finally, even though our “distribution” rate has remained unchanged since our last rate increase in 2018, the cost of wholesale energy has increased each year. We have passed those costs along to members in the form of a Power Cost Adjustment (PCA), which you have likely seen on your bill since 2018. When the new rates go into effect on May 1, the PCA will be folded into the energy rate, so any PCA charges you see during the remainder of this year and into the future reflect increases in wholesale power costs, which are passed onto the Cooperative.

Full information regarding adjustments to all rate classes can be viewed on our website.

OUR COMMITMENT
While adjusting rates is never an easy choice, member value is always our top priority with these decisions. Stearns Electric will continue its mission of providing excellent service and competitive rates.

Looking ahead, we will continue to invest in modernized equipment and infrastructure and provide members with up-to-date information on how you can reduce your energy use and get the most value out of your service.

If you have any questions or concerns regarding this rate adjustment, we encourage you to visit www.stearnselectric.org or call our offices during regular business hours at (800) 962-0655.

Sincerely,

Matt O’Shea
Chief Executive Officer