News > CEO’s Message – July 2023

CEO’s Message – July 2023

Rate Adjustment FAQ

Stearns Electric’s new rates went into effect May 1, 2023, and members received their first bills with the new rates the first week of June. This month, I want to address the most frequently asked questions we have heard from our members regarding this adjustment.

1. What is the Fixed Charge and why did it increase so much?
The Fixed Charge on your electric bill recovers the cost of providing electric service to your residence or business, no matter how much energy you use. Every residential member of Stearns Electric pays the same Fixed Charge. Fixed Charge funds are cumulated and used to purchase power poles, wires, transformers and other equipment to bring electricity to your home, farm or business.

The Fixed Charge also covers Cooperative maintenance expenses that have a direct tie to the reliable electricity you expect. These include labor, right-of-way clearing, fleet and facility functions, and necessary administrative responsibilities.

Based on the Cost-of-Service study conducted in 2022, we know in order to recover 100% of the fixed costs for residential electric service, our Fixed Charge needs to be $39. The Board set the current Fixed Charge at $34.25, which recovers approximately 80% of those costs. Additionally, the new Fixed Charge includes $3 per month per member that goes directly toward building a new headquarters facility.

2. Why do I have to pay a Fixed Charge even if I have a season property?
Although seasonal properties may not use as much energy as full time residences, the distribution system equipment and maintenance required to ensure electricity is available when you need it, is the same. Additionally, many seasonal properties have appliances or devices that require electricity even when you are away, such as water heaters, thermostats, refrigerators and freezers.

3. What is the Power Cost Adjustment (PCA) and how does it impact me?
The PCA is an adjustment to the monthly energy rate and reflects fluctuations in the cost of power. Through planning and analysis, the cost of power is determined by our wholesale power provider, Great River Energy (GRE). Though generally planned well, the true cost of power is determined by many factors including energy demand, energy generation, generation fuel sources available and weather at any given time.

Stearns Electric passes the cost of energy directly from GRE through to members each month. When the cost of power is higher than GRE budgeted, the PCA shows up as a charge on your monthly electricity bill. When the cost of power is lower than budgeted, the PCA is a credit.

4. Is a headquarters facility necessary?
We have known for a while that Stearns Electric would, and has, outgrown its current headquarters space. Over time, we have invested in small projects to make the existing facility work, but we knew at some point, we would need to explore larger options. Since 2019, a committee of Board members and employees has explored building options, including a new facility or an extensive remodel. In March 2023, after much discussion, the Board decided a new building was the most cost-effective and best solution for our needs.

Why build now? Experts anticipate that the cost of materials needed to build a new facility will only get more and more expensive into the future. Investments like this position the Cooperative to meet the current needs of members and provide room for growth over the next several decades. We are committed to doing everything in our control to keep the impact of this facility as minimal as possible on our membership.

5. Why do I have to pay $3 per month for it?
Stearns Electric was founded by members when other energy utility providers wouldn’t consider bringing electricity to rural areas because it was too expensive. Coming together collectively is the cooperative way. We took those initial member investments and spent the last 85 years building and enhancing the infrastructure to reliably serve electricity to our members. In order to maintain our infrastructure, vehicle fleet and equipment, and grow the Cooperative in the future, we come together with our members once again as we plan and prepare to power the next 85 years.

More information on the rate adjustment can be found at www.stearnselectric.org/rateadjustment2023. As always, we work for you, so please feel free to contact us with your questions and concerns. Thank you for your membership.

Sincerely,

Matt O’Shea
Chief Executive Officer