Outside pressures continue to drive up the cost of electricity. MVEC offers a broad range of affordable products and services to help members use energy wisely and lower their electric bill.
What drives the cost of electricity?
How does MVEC control costs?
How can members control costs?
How do MVEC rates stack up?
What drives the cost of electricity?
- Wholesale power (cost to generate energy you use)
For every dollar collected, 70¢ or more goes toward MVEC’s wholesale power costs.
High Quality PhotoMVEC purchases all of its energy from two wholesale providers via long-term power purchase contracts, and then delivers it to your home. This accounts for more than 70% of MVEC’s total costs. Our providers have experienced cost pressures in recent years that are likely to continue into the foreseeable future. Increasing capital costs for new transmission lines and power plants, fuel costs, EPA regulations, and Minnesota renewable energy mandates are among the main cost drivers.
- Delivery cost (delivering the energy to your location) – these are MVEC costs to get the electricity to your home or business. MVEC’s Delivery costs have been very stable over the years, and we expect this trend to continue. These costs include: depreciation and interest for new distribution plant, as well as operations, maintenance and administrative expenses. MVEC has over 3,500 miles of line to maintain. As with all things, the system ages and updates need to be done to maintain reliability for members to ensure safe and reliable electricity is being delivered to your home and business.
- Renewable energy standards – Minnesota requires all the wholesale providers to have 25% of MVEC’s energy sales from renewable energy sources by 2025. This is a phased in program. Since 2010, 7% of your energy came from renewable sources. In 2012 this requirement increased to 12%. MVEC member load is moderately increasing but at a slower pace than the mandates. The mandate creates new investments in renewable generation at a time when new sources are not needed and reduces the energy produced from existing power plants. This increases the cost of wholesale power.
- Government mandates and environmental regulations – new and proposed Environmental Protection Agency (EPA) regulations are increasing capital expenditures and operating costs. These pressures might cause premature retirement of existing low-cost coal-fueled power plants, which would drive up your electric rate. Minnesota law prohibits a utility from building a nuclear power plant, and the present law prohibits bringing in energy from new coal plants in other states. On top of this, Minnesota implemented Conservation Improvement Programs requiring utilities to show customer energy savings equivalent to 1.5% of annual retail energy sales year after year. These are new reductions each year and on-going savings cannot be included. All utilities are pressed to find new ways to offer energy efficiencies within their customers’ homes and businesses. This reduces the number of kilowatt-hours (kWh) purchased at a time when costs are increasing, resulting in higher rates per kWh.
How does MVEC control costs?
All utilities across the nation – electric cooperatives, municipals and investor-owned utilities are looking for long-term solutions to the challenges of rising costs. MVEC is not the only utility experiencing increases.
- Diversification with power suppliers – the cooperative actively looks at ways to reduce expenses and has saved over $14.6 million on power costs as a result of action taken in 2006 to add a second wholesale power supplier.
- Offering money saving programs – MVEC member programs such as Energy Wise and on-site standby generators save another $4-5 million in wholesale power costs each year by avoiding short-duration, high-cost power purchases.
- Local operating costs – although the industry is changing, MVEC is holding the line on its local operating expenses and forecasts these costs to remain flat.
How can members control costs?
Members have control of their rate choices and energy usage. It’s a system of checks and balances in helping members understand their personal energy usage.
- Participate in MVEC’s Energy Wise and on-site standby generator programs. Both have extremely positive impacts and can offer huge savings of 10-50% off your electric rates.
- Monitor your usage with Energy Check, MVEC’s free online program. Or look at the daily electricity usage graph on the back of your monthly electric bill. Many factors influence energy use: behavior of household members, appliances, lighting, machinery for business applications, the number of people within your household and weather conditions all have an impact.
- Talk to elected officials about mandates affecting the cost of electricity – visit www.ourenergy.coop for ways to participate and voice your opinions.
How do electric rates stack up?
