In December of 2023, we informed our members via the Kansas Country Living magazine that Bluestem was undergoing a Rate Study. The Bluestem Electric Board of Trustees authorized a revenue requirement and cost-of-service study to consider the need for a future rate increase. Power Systems Engineering, an independent rate consulting firm, was contracted to perform both studies.
The rate study has several stages:
1 Revenue Requirement: Calculate the revenue needed to operate the business successfully in the future.
2 Cost-of-Service Study: Identify the portion each rate class is responsible for in the suggested revenue requirement.
3 Rate Design: Design rates so that revenue is collected fairly in each rate class, while also meeting any other goals identified by the board.
Have you ever wondered how the rates you pay for electric service are established? All operations of an electric cooperative are funded through the rates paid by the members. As a not-for-profit member owned business serving your local communities, Bluestem Electric Cooperative has two primary obligations. First is to provide safe, reliable and affordable service to the members. The second is to maintain sound financial operations that satisfy the requirements of our lenders. Our member-elected board of trustees and the cooperative’s management must examine rates periodically to ensure they continue to fulfill these obligations, while keeping rates fair and reasonable for the members.
For this reason, Bluestem Electric Cooperative is currently undergoing a rate study process to fulfill this responsibility. Cooperatives use independent rate consultants to ensure the process is completed without bias. We have retained the services of Power System Engineering, Inc. to conduct our rate analysis using industry-accepted standards.
When the rate study is completed, it will be reviewed by the board in detail. The board takes its responsibility to set fair rates very seriously. After all, they are members of the cooperative and pay the same rates.
After the board’s review, they will determine if there needs to be a discussion and vote on any potential rate changes. Kansas law requires that we provide the membership with notice of the time and place of any meeting of the board of trustees, where rate changes will be discussed and voted on.
Rate change meeting notices will include as many details as possible about any proposed changes. Members will have the opportunity to attend the board meeting to hear the discussion and vote of the board, and express opinions on the changes. Members can find the notice for these meetings in the Kansas Country Living centerspread.
The study, performed by Power System Engineering, Inc. an outside independent rate consultant, is complete.
The study showed that overall electric rate revenues should be increased by approximately $1.5 million, or about 8.2%. The last general rate adjustment was in January 2017. Inflation has impacted all of us. The utility industry is experiencing inflation on items necessary to deliver safe and reliable power to our members’ homes. Following are some examples:
- TRANSFORMERS (15 kVA-single phase service) in 2017 cost $623 and now cost $1,920 — an increase of 208% over seven years (29.7% annually).
- WIRE (No. 2 ACSR) in 2017 cost $1.93 per foot and now cost $3.22 per foot — an increase of 67% over seven years (9.5% annually).
- POLES (35 foot) in 2017 cost $215 and now cost $465 — an increase of 116% over seven years (16.6% annually).
The study also showed rate structures need adjusted to better track the cost of providing electric service. Rate structure refers to the billing charges that recover fixed and variable charges.
At the Bluestem Electric 2024 Annual Meeting we outlined the plan to implement a three-part rate (Customer Charge, Energy Charge, Demand Charge) instead of the current two part rate (Customer Charge, Energy Charge). The change to the three-part rate will create a more equitable rate for all members. It will also better reflect how BEC is billed by our power supplier.
With this change, how and when you use power will be more important than ever! The new rate designs will tie costs to electrical use, so members are treated fairly.
The proposal recommends increasing the monthly Customer Charge and implementing a Demand Charge. As a result, members will notice a decrease in the Energy Charge or price per kilowatt hour. A portion of the cooperative’s costs are the same for all members in similar rate classes whether a member is a high energy user or low energy user. The cooperative has made similar investments in poles, wire, transformers and meters for all customers and incurs similar cost for reading meters, billing and consumer accounting. Increasing the fixed charges closer to the actual cost helps to minimize the amount of increase on the energy charges and more accurately tracks the cost of providing electric service.
The Demand Charge is something each member can control. Demand is the rate of energy used at any given point in time and is measured by the highest rate at which a member uses electricity during a 60-minute period and is billed accordingly. The demand charge will be billed on the highest demand registered during the billing period.
Each member’s monthly demand has been and currently is printed on their billing statement, as well as the date and time it was incurred. We encourage members to review past bills, monitor current bills and understand what impacts your demand each month.
Kansas law requires BEC to provide members with notice of the time and location of any meeting of the board of trustees where rate changes will be discussed and voted on. Meeting notices will include details about proposed changes. Members may attend the special board meeting, listen to the discussion and vote of the board, as well as ask questions on the rate changes. Meeting notices will be printed in the Kansas Country Living Bluestem News pages.
For more information on the proposed rate change, please contact the cooperative office at 800-558-1580.
After several months of studying the rates for electric service, Bluestem Electric’s Board of Trustees approved the rates published in the August issue of Kansas Country Living. A special board meeting was held Aug. 19 to discuss and vote upon the proposed rates. The approved rates will be effective on Oct. 1, 2024, and be reflected on November’s bill.
The cost of providing safe and reliable electric service has increased since rates were last adjusted seven years ago, and it is no longer possible to maintain the financial ratios required by our lenders. Increasing rates is not the only way we fight rising costs. We continue to look for ways to operate more efficiently.
For example, we continue to automate processes where feasible. We have taken steps to minimize and reduce the amount of property taxes paid by the co-op and staffing has been reduced in the last seven years.
Several measures that required an initial investment will also begin to pay off in reduced costs. Our new advanced metering infrastructure (AMI) system has advance features including instant outage detection, remote disconnect and reconnect, and data collection. This technology reduces the cost of sending a truck and staff to make these changes.
As outlined in the August notice, the study showed that revenues should be increased approximately $1.5 million or about 8.2%. This amount was apportioned to the various classes of service using the results of the cost-of-service study as a guide.
The cost-of-service study shows the average investment made to serve each class of customer, as well as the revenues and expenses attributed to each class. Furthermore, it provides the board with a relative comparison of each class’s rate of return.
A three-part rate (Customer Charge, Energy Charge and Demand Charge) was approved in place of the current two-part rate (Customer Charge and Energy Charge). The change to the three-part rate will create a more equitable rate for all members. It will also reflect how Bluestem is billed by our power supplier.
With this change, how and when you use power will be more important than ever! The new rate design will tie costs to electrical use, so members are treated fairly.
The approved rates will increase the monthly Customer Charge and implement a Demand Charge. As a result, members will notice a decrease in the Energy Charge or price per kilowatt-hour. A portion of the cooperative’s costs are the same for all members in similar rate classes, whether a member is a high energy user or low energy user. The cooperative has made similar investments in poles, wire, transformers and meters for all customers and incurs similar cost for reading meters, billing and consumer accounting. Increasing the fixed charges closer to the actual cost helps to minimize the amount of increase on the energy charges and more accurately tracks the cost of providing electric service.
The Demand Charge is something each member can control. Demand is the rate of energy used at any given point in time and is measured by the highest rate at which a member uses electricity during a 60-minute period and is billed accordingly. The demand charge will be billed on the highest demand registered during the billing period.
Each member’s monthly demand is printed on their billing statement, as well as the date and time it was incurred. We encourage members to review past bills, monitor current bills and understand what impacts your demand each month.
Rest assured BEC has not entered this matter lightly. It took diligence on the part of your member-elected board of trustees and the employees of BEC to minimize the rate adjustment — with the members’ best interest at heart.
We live by the co-op difference; we are not driven by profits to provide a return for shareholders. Rather, we are service-driven and operate at cost. Our focus is on keeping the co-op financially strong on behalf of all members, in order to continue to provide safe, reliable service at the lowest practical cost.
If you have questions, please contact the cooperative office at 800-558-1580.
