Refining PEC Processes: Part 3

Welcome back to my four part series on current events at our co-op. Today’s topic of rates is one that has invited discussion for some time. Throughout the 2014 Director Election, I heard time and time again from members that our rates are too high. That criticism is fair. Our rates are too high, and the Board and Management should be making every effort to lower PEC’s monthly bills. There are several things that account for the Co-op’s higher rates, including some inescapable debt obligations that are set to expire in the next few years. Beyond that are controllable costs, costs associated with growing infrastructure, and then a power supplier (LCRA) that’s own wholesale rates need some serious adjustments in order for us to be able to pass along lower rates to our members. I believe all of these contributing factors are on track to improve, which should collectively yield substantial rate relief for PEC members, and this past week we announced the beginnings of that desired trend. Here is a copy of a release from the PEC website concerning Tuesday’s announcement of a small rate reduction effective December 1, 2014:

     “At a special meeting on Tuesday, Sept. 30, the Pedernales Electric Cooperative Board of Directors voted to reduce the Co-op’s per-kilowatt-hour delivery charge effective with electricity purchased beginning Dec. 1, 2014.

 ‘The Board of Directors has worked with management the past few years to get the Cooperative in a very stable and strong financial position,’ said PEC Board President Dr. Patrick Cox. ‘Our current financial projections and careful analysis by the Co-op’s staff signal this is the right move to make at the right time.’

The reduction will affect all rate classes that have a delivery charge. For residential members, the reduction will amount to $5 per thousand kilowatt-hours consumed. PEC’s average monthly residential use is 1,275 kwh, so the majority of members should see even greater savings on their bills.

 ‘We continue to increase equity, debt service is far above required levels and we’ve had substantial reductions in bad debt and write-offs,’ said PEC Chief Executive Officer John D. Hewa. ‘We find this a great opportunity to provide a responsible rate reduction to the membership.’

The current per-kwh delivery charge of $0.03212 for residential members will be reduced to $0.02712, and while the decrease goes into effect Dec. 1, some members will see it reflected on later bills, depending on when billing cycles fall within the month.

The Co-op leadership also is actively working with LCRA and other power providers to further reduce costs. ‘Power supply accounts for 65 percent of all the Co-op’s expenditures,’ Hewa said. ‘We are actively exploring ways to reduce our power costs in an effort to lower member bills and anticipate more good news in the next few months.’

Two thoughts come to minds when seeing this very modest rate reduction. Since the first thought is probably critical in nature, I’ll address it first. This rate relief is not nearly deep enough. I completely agree – it’s really a “drop in the bucket,” as another Director pointed out, in terms of what PEC needs to ultimately achieve in terms of lower rates for our members. Please keep in mind that the Board and Management are fully aware of this shortcoming and know this initial rate reduction is merely a first of many gains necessary to get our rates in line with Texas’ low cost electricity providers. The second reaction to this rate decrease, hopefully, is that it is a step in the right direction. From my viewpoint as a Board Member, it’s wonderful to know that we are in a financial position to respond positively to our biggest member concern. Pedernales’ CEO John Hewa said in his statements to the Board on Tuesday that this initial cut could be the first of a handful of cuts in the coming months, and I am optimistic that the Co-op can deliver on those projections. The hope is that following a series of rate reductions and with a continuing effort to tighten the screws on the operational side, the impact to you in the form of your monthly bill will be profound enough to make a difference in your monthly budget. You, as members, deserve that from us. You deserve for us to hit our goal of being the lowest cost LCRA provider, and I’ll be working to ensure we see that outcome.

Stay tuned for the fourth and final part of the series “Refining PEC Processes.”

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