Understanding the Cost of Service Q & A 

OREMC has announced a base rate increase effective April 1. While the co-op issued wholesale power cost adjustments (increases in 2022 and a decrease in 2023), this will be the first base rate increase in over three years. 

How much is the rate increase? 
Residential rates will increase by 3.11% resulting in a $5-$6 increase on your monthly electric bill depending on your usage. 

What are the key components of OREMC’s rates? 
The price you pay for residential power is broken down into four main components: 

•  Basic facilities charge: this is a flat fee that covers the cost of maintaining our electric distribution system and service facilities so that when you flip the switch, electricity is available on demand. This is charged whether or not you have any kWh usage billed. Active accounts will be assessed a daily charge. 
• Energy charge: this recovers the cooperative’s budgeted wholesale power costs, as well as the costs to operate our distribution system and invest in system improvements that continually build system capacity, resiliency and reliability.  
• Wholesale Power Cost Adjustment: used to true-up actual cost of wholesale power to budgeted costs.  This adjustment may be a credit or a debit.  
• Equity Management Adjustment: used to true-up the difference between the actual and budgeted costs of capital expenditures with the goal of maintaining the cooperative’s equity at a target rate of 38%.  This adjustment may be a debit or a credit. 

 

Rate Component	Current	Effective April 1
Basic Facilities Charge (monthly)	$35*	$40*
Energy Charge	$ .08920 per kWh	$ .10650 per kWh
Wholesale Power Cost	$ .012416 per kWh	$ (.00446) per kWh
Equity Management	$0.00 per kWh	$0.00 kWh
TOTAL	$ .101616 per kWh	$ .10204 per kWh

*Based on 30 days billed at a rate of $1.15 versus $1.33 daily. 

 

Are OREMC rates the same all year long? 

No, OREMC has summer rates and winter rates. Cost per kWh as of April 1 will be: 

Summer rates are in effect from May 1 – September 30 
0 – 1,000 kWh    10.65  cents per kWh 
Over 1,000 kWh   13.30 cents per kWh 

Winter rates are in effect from October 1 – April 30 
All kWh    10.65 cents per kWh 

Why the two-tier rate structure during the summer? 

The overall demand for electricity is higher during the hot summer months. The two-tier structure was established to encourage energy conservation during peak demand times. A higher than usual demand for electricity during the summer months can result in higher energy bills year-round. 

Why is a wholesale power cost adjustment necessary? 
OREMC’s retail electric rates are designed to recover all operating costs, the largest of which is the cost of purchased power.  The cost of purchased power can vary significantly from budget due to fluctuations in the costs of fuels used to generate electricity.  Significant variances from budgeted purchased power costs will produce under/over recovery of actual costs.  Natural gas, used to generate most of the energy we purchase, is particularly susceptible to price volatility due to storage and transportation constraints. The wholesale power cost adjustment may be a credit or debit and is merely a true-up mechanism for significant variances from budgeted costs. 

What makes an equity management adjustment necessary? 
As a not-for-profit, consumer-member owned cooperative, OREMC does not have shareholders. The entire distribution system is collectively owned by our members, and the cost of building and maintaining that system is paid for by you. Equity refers to the amount of money collected and reinvested directly into the system to ensure system capacity, redundancy, and reliability. Equity offsets debt, meaning more equity in the system means less debt. The Board of Directors has determined 38% equity is the optimal rate of investment. The equity management adjustment allows for rate adjustments based on maintaining 38% equity without having to formally change rates. 

What is driving the rate increase?  
There are three main drivers behind the rate increase: 

• Materials and labor costs: With system growth, development and improvement comes the need for more plant and materials—poles, wires, transformers, reclosers, etc. Availability of materials, long-lead times and labor shortages in manufacturing have resulted in large cost increases for many components of our electrical system.    Some components such as transformers have tripled in price over the past three years. These higher costs are passed through/recovered by our rates.   

• System growth and improvements: Technology and new services account for much of OREMC’s system improvement and expansion. New technologies have been invested in and implemented across our system to improve reliability so that when an outage does occur, it impacts the fewest number of members for the shortest amount of time. There has also been a significant real estate boom across our system since COVID. This results in the need for new line construction and/or increased capacity on existing lines.   

• Cost of power: You may be saying, “I thought that is what the wholesale power cost adjustment is for?” The answer is yes and no. When we issued the wholesale power cost adjustment increases in 2022 and the decrease in 2023, it was all related to a significant and unforeseen increase in the price of natural gas. But natural gas is not OREMC’s only source of power supply. We have a mix of fuels in our power supply including renewables, coal and nuclear—much like everything else, the cost of production has increased over the past three years. 

Why now? 
Why now is tied to the fact that OREMC schedules a rate study every two to three years. The study's purpose is to evaluate changes in costs and revenue, determine if rates are under-collecting, over-collecting or neutral, and adjust accordingly. Our last base rate increase was in November 2020. Since then, the overall inflation rate has increased 18% and impacted the overall cost of goods and services—groceries, fuel, dining out, clothing, vehicles, housing—including the utility industry. 

Have billing concerns or usage questions? 
If you have questions or concerns about your OREMC bill, please contact OREMC Member Services at 800-262-5131. They can review your bill with you, explain your usage and discuss billing/payment options.