What is the Fixed Charge on My Electric Bill?
The Fixed Charge is designed to recover the basic cost of electric service, independent of how much energy is used. It accounts for Stearns Electric’s investment in equipment like poles, wires and transformers, as well as labor to provide members with safe and reliable electric service.
It supports fleet, facility and customer service functions, such as line maintenance, right-of-way clearing, member service support and administrative responsibilities.
If you only use one kWh of electricity and your neighbor uses 1,000 kWh, Stearns Electric still incurs the same cost to build the line, maintain the distribution system and deliver electricity to both of you.
What are those monthly costs?
First you’ve got equipment. Let’s start at your meter. There is a monthly cost to own, maintain and read your meter. Next you have transformers. You’ve got your typical ownership and maintenance costs but there are also operating costs including keeping the transformer energized.
Following the infrastructure line, you can’t forget the obvious — our distribution lines. In order to deliver electricity, we must have the wire and poles to reach across our service territory and back. Stearns Electric owns and maintains over 4,000 miles of line, all of which carry operating and maintenance costs. Beyond that, when storms cause damage, our lines need to be repaired or replaced. We also have to clear the right-of way around those lines. Over the years Stearns Electric has installed a significant amount of underground cable. This cable doesn’t require as much maintenance but it is typically more expensive to install and more difficult and time consuming to locate problems and restore outages.
Next, we have a substation to step down the high voltage electricity from transmission lines to our 7,200 volt distribution voltage. Then we’ve got all our trucks, diggers, inventory and tools. And don’t forget about our buildings. As you can see, the expenses start to add up quickly.
Now let’s talk about our business functions. There are costs to calculate your bill, send the bill and possibly costs associated with posting the payment. Costs related to our computer systems and telephone systems, costs related to accounting, financing, collections, dispatching, customer service and communication are all required to do business. We also have to pay the dedicated and qualified people that are employed by your Co-op.
While the list of costs could go on and on, the important message here is that none of these costs change in regards to how much energy you or your neighbor use. The fixed charge is designed so that each member is paying a fair share of the cost to access electric service. The energy charge is just that — the purchase price for the energy you use.
Does the new $24.75 Fixed Charge for residential accounts cover all of our fixed costs? The quick answer is no. You’ve probably already read that Stearns Electric periodically completes what is known as a Cost of Service study performed by a third party which determines how our costs should be allocated and recovered through our rates. If not, read our CEO column here.
Our most recent study, completed in early 2018, showed that if we were to recover all the costs that should be recovered through the Fixed Charge, the amount would be much higher, at $33 per month.
In summary, no matter how much or how little energy you use each month, there are certain costs that must be recovered. Our goal is to recover those costs as fairly as possible which is why we have a monthly Fixed Charge.
Stearns Electric works hard to keep its electric rates competitive. The bottom line is to have rates that are affordable and fair. We are committed to providing you with reliable, affordable and environmentally responsible electric 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.
November 29, 2023
In September 2023, the Stearns Electric Association Board of Directors authorized a $1.175 million general retirement of Cooperative Capital Credits…