What’s one thing that everyone dreads looking at right now? THE PRICE TAG.
Inflation, as measured by the U.S. Bureau of Labor Statistics Consumer Price Index Summary, jumped 9.1% in June compared to June of 2021. This was the largest annual increase since Nov. 1981.
While everyday household items like fresh chicken (up 15.5% from June 2021 to June 2022), coffee (up 15.8%), butter (up 21.3%), and even eggs (up 33.1%) have all jumped, the biggest pain has been at the pump (more to come on that below).
Your cooperative is facing our own share of difficulties amid this economy, rising generation costs, and the current state of the electric utility industry. Everyone knows costs are increasing … but what’s the real impact?
According to the AAA Gas Prices calculator, in Ohio, the average gas price at the time of publication (November 2022) is $3.72; the average diesel price is $5.59. One year ago, the Ohio gasoline average was $3.17; the diesel average was $3.65.
For Ohio, that means gasoline jumped 17.42%; diesel surged 53.11%.
From January through August of 2022, NWEC has consumed about 13,000 gallons of fuel, with most of that being diesel. This equates to about $25,000 in extra expense to run our trucks and equipment. Completing new services, fixing poles, and restoring outages — all needed to grow and maintain our system — means we have to transport our equipment and staff across our entire service territory.
Ready for sticker shock? See the included graphic to the right. This shows the percent increase of various electrical material and parts of a pole assembly from 2021 to 2022. The lowest increase on this list is 7% (the cost of a pole), but conduits have spiked 313% in the last two years.
Back in 2020, a 50 kVA pad-mount transformer cost NWEC an average of $1,618. This June 2022, that same transformer costs us $2,294. What about buying refurbished? That same transformer costs $5,065 refurbished, mainly because of supply shortages — and the wait list for a transformer is out until fall 2023.
These cost increases aren’t going away, and your co-op is having to plan (and budget ahead) to stay ahead.
Transmission costs — or the cost to transmit power many miles from our plants to local substations — are surging. NWEC’s average transmission network demand charges, billed by grid operators PJM, increased in 2022 to $194,793 per month (up 13.5%).
Wholesale power cost adjustment
The cherry on top —the biggest expense NWEC has — is power cost, or the cost of electricity generated by our plants and delivered to your home. As commodity prices increase, the cost to generate electricity increases; this is where the wholesale power cost adjustment (WPCA) on your bill comes into play. This WPCA collects the increased cost NWEC must pay from our wholesale power supplier, Buckeye Power, who supplies all our electricity.
Overall, the Buckeye price of power has increased nearly 3% this year. The leading driver is transmission cost (mentioned above), which has increased almost 15% this year alone.
Back in 2015, NWEC’s purchase cost per kilowatt-hour was 0.0689. It’s been creeping up steadily; through August 2022, our purchase cost per kWh is up to 0.0790.
NWEC does our best to keep rates as steady and affordable as possible for member-owners — our management team, President/CEO, and Board of Trustees works hard to keep controllable costs down. However, costs like the WPCA are not within our control and must be recouped for the cooperative (a not-for-profit entity) to stay financially stable.
As conditions change, rest assured your cooperative will do its best to keep members informed of rising expenses. Despite current cost aches and pains, NWEC’s vision looks ahead to a brighter future. When it comes to the best interests of our member-owners, we keep a long-term strategic outlook.