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New PEC rate mechanism to lower members’ bills

Nov 01, 2015

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Chart outlining savings from new revenue adjustment factor credit

The typical residential PEC account can expect to see about a $7 RAF credit as a line item on its December bill.
Click chart to enlarge.enlarge photo

December bill credit to reduce forecasted Co-op revenue by estimated $2 million

Effective Dec. 1, Pedernales Electric Cooperative will implement a new rate mechanism: the revenue adjustment factor (RAF). This per-kilowatt-hour credit, approved by the Board of Directors, will lower bills and is designed to be activated temporarily to reduce higher-than-forecasted revenue by lowering the amount billed to members.

Sales of electricity for 2015 are slightly higher than forecasted, and the Co-op has worked diligently to contain costs. The RAF rate mechanism will be activated for the first time Dec. 1 to Dec. 31 with bill credits totaling approximately $2 million.

“PEC collects a significant portion of the Cooperative’s revenues through a dollar-per-kilowatt-hour rate,” explained Ingmar Sterzing, PEC Vice President of Power Supply & Energy Services, “so when sales increase from continued growth or extreme weather, the Co-op may generate more revenue than forecasted. The RAF allows for a temporary rate reduction to reduce revenue. This way, our members see an immediate reduction on their electric bills.”

PEC – a not-for-profit cooperative owned by its members – sets its rates to meet margin goals and satisfy financial obligations; however, a series of unexpected winter cold fronts, a hotter-than-expected summer and operational cost reductions generated higher-than-forecasted revenue for the Co-op.

“We are demonstrating agility and flexibility by creating a rate mechanism that helps lower costs for members,” said PEC CEO John Hewa. “While the initial revenue projection is within 0.5 percent accuracy, reducing revenue from members is the right thing to do. As a not-for-profit, owned by our membership, we think this is one of the distinguishing features that makes the cooperative business model so effective.”

With the $0.0056 RAF credit per kwh, the typical residential PEC account can expect to see about a $7 RAF credit as a line item on its December bill. These savings, combined with PEC’s December 2014 delivery charge decrease and three 2015 power cost adjustment decreases, result in a total savings of nearly $27 in December for the typical residential account (versus November 2014). All rate classes with the exception of Industrial and Power Plant Start Power will receive the RAF credit. The RAF will return to $0.0 per kwh effective Jan. 1, 2016.

PEC’s new Revenue Adjustment Factor

  • Only a credit – never used as a rate increase
  • Activated temporarily by the PEC Board as needed
  • Used to reduce higher-than-forecasted revenue
  • Helps PEC serve members uniquely as a not-for-profit cooperative
  • Applicable to all rate classes with the exception of Industrial and Power
    Plant Start Power
  • Effective on bills issued Dec. 1 to Dec. 31 as a $0.0056 per kwh credit; returns to $0.0 per kwh on Jan. 1, 2016
  • Estimated $2 million credit is the result of cost containment and higher-than-forecasted electric sales

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