Find quick answers to frequently asked questions about your Lake Country Power electric service.
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Power costs
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PUC Regulation
Why did Lake Country Power raise rates in 2010?
What is being done to control costs?
Why has my electric bill gone up?
What is responsible for the additional GRE Wholesale Power Cost Riders?
Why are there sometimes two GRE Power Cost Riders on my bill?
Why doesn't Lake Country Power buy power from someone else?
How do Lake Country Power's electric rates compare with other utilities?
Why are co-op rates higher than other utilities?
What is the Facilities Charge?
I only use a small amount of electricity, the Facility Charge is unfair:
Why is Lake Country Power's facility charge/rates higher than other utilities?
Why are Lake Country Power's rates higher than Minnesota Power?
What can I do to minimize my electric bills?
Energy conservation measures:
WHY did Lake Country Power raise rates in 2010?
The board authorized a $2.50 increase to the monthly facilities charge and adjusted the street and security lighting fee by 75 cents per month to stay on track with key strategic objectives, generate a $3 million margin and meet financial requirements set by lenders. The rate changes are expected to:
- Improve cash flow
- Improve Equity (Equity represents the member’s share of investment in the cooperative – for example, equipment like substations, poles, wires and transformers).
- Retire Capital Credits (the co-op has budgeted $1 million for capital credits retirements in 2010)
The baseline Power Cost Rider (GRE PCR#1 on monthly electric bills) is estimated to be 2.38 cents in 2010, with the PCR for Energy Wise programs dropping to zero to start the year. The power cost riders, which reflect the additional costs of wholesale power since January 2008, may vary from month to month throughout the year due to fluctuations in wholesale power adjustments that are passed on from our supplier.
WHAT is being done to control costs?
Lake Country Power’s board of directors approved a 2010-operating budget that holds locally controlled expenses flat – with no increase in variable expenses over 2009 levels. Our power supplier, Great River Energy has responded by reducing its planned operations and maintenance expenses, instituting salary freezes for management, implementing a hiring freeze for non-critical positions and reducing its capital budget in an effort to minimize rate increases.
WHY has my electric bill gone up?
The cost of wholesale electricity that Lake Country Power buys has risen significantly over the past eight years (especially the last two years). Our co-op power bill was $20 million in 2001, and $40 million in 2009. Great River Energy, our wholesale supplier, has increased its rates to Lake Country Power by 29 percent since December 2007.
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Despite recent increases, electric rates for the typical member have risen on average one and half percent per year over the last 28 years. Our challenge locally is to keep rates affordable, electric service reliable, and the co-op in a solid financial position (while power costs continue to rise) so we can continue to provide you with the electricity to turn on your lights, or heat your home, while still meeting financial requirements set by lenders.
WHAT is responsible for the additional GRE Wholesale Power Cost Riders?
The GRE Wholesale Power Cost Riders #1 and #2 line items on LCP member bills are a result of the additional costs that have been passed on to our co-op by Great River Energy, our power supplier since January 2008. The GRE line items on electric bills help Lake Country Power recover the additional costs that have been charged by GRE.
GRE cites several reasons for the cost increases:
- Reduced non-member sales: Great River Energy sells excess electricity to other utilities, which offsets a significant portion of their fixed costs. Since 2001, GRE has invested more than $1 billion in power plants and transmission facilities to meet the peak demand of its member systems. However, there has been little need for surplus power in the “market” since January 2008, and that means the fixed costs of those power plants and transmission facilities are shared across fewer sales to co-op members.
- The impact of wind: GRE has added 200 megawatts of wind energy, but adding wind energy requires other types of generation to back it up, because the wind does not always blow. This “overlapping” investment has driven up power costs. Minnesota utilities are required to generate 25 percent of their electricity from renewable resources by 2025, at a time when consumers are using less electricity.
- Increased cost of fuel: Additional expenses come from the rising cost of fuels such as coal and a host of new regulations set by the state and federal government. These include the renewable energy standard and stringent environmental controls. Increasing fuel costs have had an impact on operations.
WHY are there sometimes two GRE Power Cost Riders on my bill?
GRE charges Lake Country Power for all of the energy we purchase on behalf of our members – this includes the power we buy for general service energy, as well as the electricity for Energy Wise programs, like Dual Fuel heating. The power cost riders apply to all energy sales, and are set to recover costs in proportion to the energy we purchase from GRE for our system (both lower-cost Energy Wise pricing, as well as general service electricity).
The line items are tied directly to power cost increases from Great River Energy, Lake Country Power is passing through the additional costs, and has varied at times due to fluctuating power cost adjustments.
WHY doesn’t Lake Country Power buy power from someone else?
Lake Country Power received ten proposals from seven different suppliers in 2009, including Minnesota Power. The cooperative is projected to purchase almost $125 million in wholesale power over the next three years and market conditions have prices at lows not seen in many years.
The “reward” was a projected first year savings of $0.15 (fifteen cents) per month to a typical residential member. The projected savings over the remaining two years steadily declined to almost zero by the end of the contract.
Risk assessment
With the reward however, came additional risk: The lowest evaluated proposal still subjected the cooperative to power cost adjustments, price increases, renewable energy requirements and transmission delivery risk. The risks and unknowns do not outweigh the projected savings from an alternate supplier that has essentially the same price and contract terms and conditions as the current supplier.
While the cooperative will continue to purchase 100% of its power requirements from GRE for the time being, we will closely monitor the marketplace while we fully engage GRE in its efforts to control costs.
HOW do Lake Country Power’s electric rates compare with other utilities?
Lake Country Power’s rates are very competitive with other electric cooperatives in northern Minnesota. One significant difference between Lake Country Power and investor-owned utilities (like Minnesota Power), or city-owned utilities, is that the other utilities average between 35 and 55 customers per mile of line. Lake Country Power averages less than six members per mile. The costs for line construction and system maintenance are the same, but we have fewer consumers per mile to pay for the line, customer service support, materials and equipment.
WHY are co-ops' rates higher than other utilities?
(See questions/answers directly above).
Electric co-ops were formed years ago because there wasn’t enough return on the investment for other utilities to serve rural areas with electricity. That’s why co-ops were formed … and that’s why we’re still here today. Our job is to provide safe, reliable and affordable service on an at-cost basis in areas that don’t provide the return that other utilities, like investor-owned energy providers, prefer.
Co-ops, like Lake Country Power, are cost-based electric utilities and our charges to you are only for the costs of providing the electric service to your residence (or business). After expenses for providing your electricity are paid, the money left over (the margin) is set aside for all members who purchased electricity during the year as Capital Credits.
What is the Facilities Charge?
The monthly fee recovers a portion of the local co-op cost of delivering electric energy to members. Part of our “fixed” costs are also collected through the kilowatt-hour charge.
- It accounts for the co-op’s investment in equipment like poles, wires and transformers, as well as labor to provide members with safe and reliable electric service.
- It supports fleet, facility and customer service functions, such as line maintenance, right-of-way clearing, member service support and administrative responsibilities.
- It’s similar to monthly fees that other utilities charge (such as telephone service providers).
I only use a small amount of electricity, the FACILITY CHARGE is unfair:
If one member uses only one kilowatt-hour of electricity and another member uses 1,000 kWh, the cooperative still incurs the same cost to build the line, maintain the distribution system and deliver electricity to both customers. The co-op’s rates are set to recover costs as fairly as possible so you have lights, heat or other comforts provided by electricity when you need it, regardless of how much energy is used by individual members.
WHY is Lake Country Power’s Facility Charge/Rates higher than other utilities?
- Overall, Lake Country Power’s rates are comparable to other cooperatives in northern Minnesota
- Some utilities have higher monthly fixed facility charges, while others blend a lower facilities or service charge with a higher energy (kWh) charge. Most utilities also include a power cost or resource adjustment.
- If we had higher density (more members on our system) it would help lower the overall fixed costs (the facility charge) for each consumer on the system.
- Lake Country Power averages less than six members per mile of line. We maintain more than 8,100 miles of line.
- Utilities that serve cities, towns and higher density areas typically average between 35 and 55 consumers per mile. The higher density helps offset the monthly costs for equipment like poles, wires, transformers and maintenance as well as service to consumers on a utility system. A rural system like ours that averages less than six members per mile of line doesn’t have the same consumer density as a city, suburb or town to help spread costs across the system.
- The costs for line construction and system maintenance are the same, but we have fewer consumers per mile to pay for the line on a rural system.
WHY are Lake Country Power’s rates higher than Minnesota Power?
- Lake Country Power serves primarily rural residential areas.
- Nearly 95% of our membership base is residential and seasonal. Some electric companies serve large commercial and industrial accounts, which benefit the utility and its other customers because of the revenues generated from the commercial/industrial facilities. Because of the limited commercial/industrial load on our system, our members do not benefit from such a luxury.
- Utilities that serve cities, suburbs, towns and high-density areas typically average between 25 and 55 consumers per mile. The higher density helps offset the monthly costs for equipment.
For example:
• Minnesota Power averages 23.55 consumers per mile and $82,221 in revenue per mile
• Nearby municipal (city-owned) utilities average 42 consumers per mile, and $71,000 per mile of line
• Lake Country Power averages less than 6 (six) consumers per mile, and generates $8,000 per mile of line
WHAT CAN THE MEMBERS DO TO MINIMIZE ELECTRIC BILLS?
Lake Country Power offers a number of options to help you manage your power bill.
- rebates for energy efficient appliances
- budget billing, which evens out your payments year-round and provides a way to manage your monthly bill and your monthly budget
- home energy assessments and audits
- low-cost Energy Wise heating and cooling programs (we expect electric rates for load control programs will remain very competitive in comparison to other fuels)
- automatic payment options – with LCP Easy Pay, an automatic monthly bank drafting option
If you are interested in learning more about these services, contact us at 800-421-9959.
- Set your thermostat to the lowest comfortable temperature setting in the winter
(Dept of Energy recommends 68 degrees) - Insulate your water heater
- Caulk around doors and windows
- Repair leaking hot water faucets
- Turn off lights when you leave a room
- Wash and dry full loads of laundry (or air-dry loads, but don’t overload the dryer)
- Lower the thermostat on your water heater to 120 degrees F
- Replace or clean your air filters once a month
- Invest in energy-efficient equipment. When upgrading look for the ENERGY STAR® symbol
- Check out our residential in-home energy assessments and other practical energy-saving ideas online.
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What is the facilities charge?
The “fixed” or basic charge (called a facilities charge) is a flat fee designed to recover a portion of the cost of delivering electric energy to all members. The facilities charge is reflective of the investment in poles, wires, transformers and equipment that it takes to provide you with electric service. It also supports fleet, facility and customer service functions, such as line maintenance, right-of-way clearing and general administrative responsibilities and is similar to service or facility charges that other co-ops and utilities charge. Regardless of how often you flip on the light switch or the TV, these costs are part of the bill you pay so that electricity is available to you whenever you want it.
If one member uses only one kilowatt-hour of electricity and another member uses 100 kWh, Lake Country Power still incurs about the same cost to build the line, maintain the distribution system and deliver electricity to both customers. It takes just as much equipment to deliver one kilowatt-hour as it does 100 kilowatt-hours. This is why the monthly facilities charge is important to recover a portion of the cost of delivering electricity to all members and help maintain the financial health of the cooperative.
Why is my bill sometimes estimated?
All co-op members have automated meters, but your bill could be estimated because:
- The electronic “noise” and interference within your home or cabin can prevent your automated meter from being read.
- There may be a large industrial site nearby, which causes interference with automated readings occasionally.
- A storm or lightning may have caused interference to Lake Country Power’s electrical system before the automated meter reading would have been taken.
- You may have turned off the breakers, which prevents any available readings from off-peak and other Energy Wise meters.
- If you’re a seasonal member, you may have shut off the breaker panel. Your main automated meter will still send meter readings automatically, however your off-peak and other Energy Wise meters won’t work and an estimate will need to be figured for your bill.
If meter readings are estimated for two consecutive months, Lake Country Power personnel will be scheduled to read your meter, except in cases where the member has turned off power to the meter or the meter is seasonally inaccessible. You will not be charged a meter reading fee for this service. You are welcome to read your meter(s) and report them directly to our office. Readings may be reported on our Web site or by calling 1-800-421-9959.
Why doesn’t my payment show up on my bill?
If a payment is received after the due date, it may not have been credited to your account before the bill was processed, printed and mailed. If this occurs, please call the call center or billing department to ensure payment was received and ask for the actual balance.
Why is my bill so different than my neighbor’s bill?
Your energy bill is a direct reflection of your usage. Your neighbor has a completely different set of circumstances—a different home, different types of electrical appliances, and contrasting electric usage patterns.
I was on vacation last month so why isn’t my bill less this month?
Even when you’re away from home, appliances continue to use energy—the water heater maintains water temperature, refrigerators and freezers keep food cold, clocks keep time, ventilators circulate the air, heating and air conditioning equipment maintain house temperature. Periods directly before and after a vacation often include intense energy use through clothes washing and drying, water use, etc.
Why do my bills fluctuate?
Bills often fluctuate because your utility use more than likely varies from month to month. Factors that affect utility use include the number of people in the household, new or additional appliances or vacations.
Bills also fluctuate with the weather. When the weather is hot and humid, consumers tend to use more energy and require additional power for air conditioning, fans and refrigeration equipment. The same concept applies in cold weather. We use additional energy to heat our homes and operate heating appliances. The spring and fall months are traditionally lower energy use for most homes.
Why am I asked for personal information?
All utility companies are required to establish identity theft prevention programs in order to comply with the Federal Trade Commission (FTC) “Red Flags” rule. A red flag is a pattern, practice or activity that indicates the possible existence of identity theft.
All utilities are required to take additional steps in order to verify identity. Whether you apply for new service or transfer your service into another name with Lake Country Power, we will run a verification and credit check to confirm the validity of your identity and establish a deposit amount. We will ask you several key personal questions before discussing any information on the phone. These questions will be personal account information and one will include a secure password.
The end result is that the new Red Flags Rule will now require more of members and the cooperative, due to the criminal activity linked to stealing the identity of others. Although the extra precautions may seem inconvenient, the intent is to help protect our members and do our part to help prevent identity theft from happening.
The Red Flags Rule – A cause for concern?
Rick Lemonds
I want to thank Lake Country Power members who’ve provided information based on the new Red Flags Rule. The requirements have us working hard to safeguard your personal and account information under guidelines developed by the Federal Trade Commission.
The goal of the Red Flags Rule is to minimize the chances for fraud and identity theft of individual account information. The irony, of course, is that we need to ask co-op members for personal and specific information to do that.
The reason for personalizing your account information is that it makes it harder for scammers to access your account records by calling in and claiming to be “you!”
To members who are understandably concerned with Lake Country Power asking for sensitive information: I apologize if we’ve not made the methods of the Red Flags Rule clear enough. The process can be confusing and I assure you that you are not alone in your concern.
To clarify, please remember that for existing members, it is entirely your choice whether or not you choose to share your personal information with us. If you choose not too, it won’t affect restoration of service when outages occur, it won’t affect the reliability of your electric service and it won’t affect our automatic meter reading service. All new accounts will have the necessary information built into the application process.
If you do call to talk about your account, your bill or your usage in the future, we offer options so you don’t have to supply personal information in the mail. These options include initiating a call to us to provide the information, or stopping by a service center, and providing a picture I.D.
By doing this, we’ll be able to validate your identity over the phone if you (or your spouse) call in the future looking for account or usage data. In addition, our online account information will be set up with appropriate passwords to safeguard access to your account information as well.
Finally, be wary of fake phone calls that ask for personal information. Never provide it over-the-phone if someone calls you asking for it. Lake Country Power won’t call asking for it. The information that we have requested is up to you to provide. This way, when you initiate the call, you can be sure you have Lake Country Power on the line.
While no business or government can absolutely guarantee the prevention of Identity Theft, the Red Flags Rule has been established to guard against identity theft and we are implementing the requirements in the most efficient manner possible. Lake Country Power, like other utilities and financial institutions, is working hard, and is duty bound, to implement these methods on behalf of our members. We ask for your continued patience and support.
Rick Lemonds is general manager of Lake Country Power, a Touchstone Energy Cooperative that serves more than 41,000 members in parts of eight counties throughout northern Minnesota.
Automated Meter Reading Q&A
How will AMR affect my home-based HAM radio system?
Our system is not broadband over power line and will not interfere with ham radio because it’s at a much lower frequency.
How will AMR affect my satellite system?
It should have no effect. Our carrier signal over the power lines is at a much lower frequency than satellite communications.
How will this technology affect my rates?
Lake Country Power performed an extensive cost analysis before implementing the system. We identified efficiencies and savings that offset the installation costs over the life of the system. It should not affect your rates.
What is the durability of the new meter?
The new electronic meter meets or exceeds all standards for electric utility use. It has no moving parts and is built for long life. We have had experience with commercial electronic metering for twenty years with proven durability.
Now that I no longer need to read my meter, what billing options does the cooperative offer that will help me pay my bill?
Lake Country Power offers LCP Easy Pay and Budget Billing. Members can still read the LCD display on the meter to double-check billing or verify their own usage. Lake Country Power now offers online payments and credit card payments as additional billing options.
How do I read my new digital (AMR) meter?
Your automated meter provides a six digit reading to Lake Country Power for you. Your energy usage is the difference from the previous reading to the current reading submitted to the co-op by the meter. For example, if the previous reading was 001623, and the present reading is 002423, the difference in numbers is the kilowatt-hours of energy your household used. In this case, the usage would be 800 kWh.
I’m a commercial member. My electric meter is flashing numbers. How do I read this meter?
Commercial type CT meters are programmed to flash numbers. It’s normal for the meter to flash three set of numbers: 888888, 000000, and 001938. The third time is the kilowatt-hour reading you need to report for your usage. If you’re a commercial member and have additional questions about this type of meter, please contact a Member Service Supervisor at 800-421-9959.
Because Lake Country Power is a cooperative, owned by its members, it does not earn profits. Instead, any revenues over and above the cost of doing business are considered “margins.” These margins represent an interest-free loan of operating capital by the membership to the cooperative. This capital allows Lake Country Power to finance operations and — to a certain extent — utility construction, with the intent that this capital will be repaid to you in later years. We have provided answers to some questions for a better understanding of capital credits.
WHAT is the difference between allocated and retired capital credits?
Allocated capital credits appear as entry on the permanent financial records of the cooperative and reflect your equity or ownership in Lake Country Power. When capital credits are retired, a check is issued to you and your equity in the co-op is reduced.
HOW often will I receive an allocation notice?
You will receive an allocation notice annually after the finances for the previous years financial statements have been completed and audited.
WHEN will I receive my next capital credit payment?
The next capital credit retirement is scheduled for December 2009 if margins allow. Retiring capital credits on an annual basis is a long-term strategic goal set by the Board of Directors.
HOW are capital credits calculated?
The amount of capital credits you earn in a given year is based upon the amount of capital you contribute to the cooperative through payment of your monthly bills. The more electric service you buy, the greater your capital credits account — although the percentage will remain the same. The sum of your monthly bills for a year is multiplied by a percentage to determine your capital credits.
WHAT percent of my bill is returned as capital credits?
The percentage of your total payment that is allocated as capital credits varies from year to year, depending upon the financial health of the cooperative. Capital credits are only allocated for a year in which Lake Country Power earns margins.
WHY does it take so long to be paid from my capital credit account?
The co-op has retired all capital credits through 1981, and when all capital credit accounts over 25 years old are retired a “hybrid” process will likely be implemented, in which current members will also receive a retirement (based on a percentage of the amount of capital current members contribute to the cooperative through payment of monthly electric bills).
WILL I receive a capital credit check every year?
Not necessarily. The Board of Directors must authorize a retirement before you receive a check. When considering a retirement, the Board analyzes the financial health of the cooperative and will not authorize a retirement if Lake Country Power can not afford it.
WHAT do I have to do to start accumulating capital credits?
Capital credits are calculated by Lake Country Power for every member who purchased electricity during a year in which the utility earned margins. No special action is required to start a capital credits account. Your membership activates your capital credits account. If you are billed for service for even one month, you will accumulate some capital credits if Lake Country Power earned margins in that year.
CAN I use my allocated capital credits to pay my electric bill?
No. Allocated capital credits may not be used to pay current bills. Billing statements represent a current payment due. Capital credits accumulate over time and are used as working capital for the cooperative.
WHAT happens to the capital credits of a member that dies?
The capital credits of a deceased member may be paid on a discounted basis without waiting for a general retirement. A representative of the estate must request the credits by submitting a certification of entitlement form and a copy of the death certificate.
WHY discount early retirements?
By discounting special retirements, such as estates, the cooperative can make a payment sooner than it otherwise would without unfair cost to other members of the cooperative. Discounting special retirements reflects the time value of money and provides a fair way to recognize special circumstances while continuing to treat members equitably.
WHAT is the “time value of money” and why is it applied to early retirements of capital credits?
This commonly accepted accounting method allows for the valuation of money in the future to be adjusted for today’s value by providing a lump-sum "present value" of the entire amount. Said differently, it factors in the value of money and a typical amount of interest for a given amount of time. For example, $100 of today's money held for a year at 5 percent interest is worth $105, therefore $100 paid now or $105 paid exactly one year from now is considered the same amount of money paid out.
WHAT happens to my capital credits when I leave the Lake Country Power service area?
They remain on the books in your name until they are retired. You should make sure that Lake Country Power always has your current mailing address to ensure the co-op’s records are up-to-date when retirement checks are issued.
Payment Q&A
What should I do if I can’t pay my bill?
If you can’t pay your bill in full, you can request a payment arrangement to fulfill your obligation over an extended period of time. Simply contact Lake Country Power at 800-421-9959 and someone can help you get started.
If your income is limited, we have a list of heating assistance providers that may have resources available if you meet the qualifications.
Can I pay my bill online?
Yes! This service is now available.
What other payment options does Lake Country Power offer?
LCP Easy Pay is a free electronic funds transfer program that can help simplify your life and save you a stamp each month. Payments are automatically deducted from your checking account on the due date each month. You can download an LCP Easy Pay application here or request a form by calling 800-421-9959.
Budget billing can be used to level out your power bill over the course of a year. Monthly bills are based on your energy usage for the previous year and averaged out so you pay the same amount each month. The month of August is designated as catch up month when the remaining balance or credit is applied. You can request a budget billing application by calling 800-421-9959.
How do I start a new service with Lake Country Power?
You can start your utility service by submitting a New Service Application to one of our new service representatives in Grand Rapids, Mountain Iron or Kettle River.
How do I transfer my service?
You can transfer your utility service by submitting a Service Transfer Application to Lake Country Power’s Call Center.
What do I need to know about CFLs?
Even though compact fluorescent lights contain a small amount of mercury (5 milligrams or less), Minnesota state law requires they be recycled and not thrown in the trash. Now co-op residential members can take their CFLs to Menards for free recycling!
How to clean up broken CFLs - MN Pollution Control Agency
Lake Country Power’s service area is loaded with trees. Why don’t you bury all your power lines in the ground to avoid contact?
Underground power lines don’t eliminate outages and can result in longer outages in normal weather. Underground lines are susceptible to failure caused by digging, animals, lightning strikes, frost movement and normal shifting patters with soil and rock. Damage to underground cables takes more time and money to locate and repair.
People, Property and Power Lines: This brochure explains the questions about power lines on or near your property.
PUC Regulation Petition: Questions & Answers
Meetings have been held by members to discuss regulation of Lake Country Power by the Minnesota Public Utilities Commission. Members are concerned about the rising cost of electricity, and are looking for alternatives—including the possibility of regulation. This questionnaire has been developed by Lake Country Power to address key questions by members about the issue.
Update as of August 16, 2010: A Final Perspective
What is the opinion of the board of Lake Country Power regarding regulation?
It is the right and privilege of the membership to vote on regulation. The board and staff are working to hold down costs, but if members vote for regulation, we’ll incorporate the additional costs into electric rates and proceed accordingly.
Ultimately, the decision is up to members. The board and staff will work hard to meet the MPUC requirements if members proceed with a vote for regulation. Lake Country Power’s role is to ensure members have accurate and necessary information to make an informed decision.
Will regulation lower my electric bill?
No. Regulation by the Minnesota Public Utilities Commission will not lower electric rates, and will not remove power cost riders from monthly bills. Additional regulation will add to the co-op’s costs – and to members’ monthly electric bills.
What is the role of the Minnesota Public Utilities Commission?
The mission of the MPUC is to maintain a regulatory environment that ensures safe, reliable and efficient utility services at fair and reasonable rates – not to lower electric rates. The regulator’s function is to provide a reasonable rate of return so the utility can safely and reliably operate the business on behalf of its consumers.
Who pays for the regulation?
Co-op members pay for the additional cost of regulation – through direct charges, MPUC charges and indirect costs for additional paperwork filings, lawyer fees and power consultant contracts. The indirect costs also do not cover additional staffing requirements at the co-op to administer PUC filings and rate cases. These costs will likely be passed on as a separate “regulation” power cost rider on monthly electric bills.
What does regulation involve?
Regulation is a process in which Lake Country Power pays MPUC employees, MPUC lawyers and power consultants to review and affirm the co-op’s rate of return based on annual operating costs and expenditures. LCP’s return on equity in 2009 was 3.7%, compared to 10.74% for Minnesota Power – a regulated utility.
Why are some utilities regulated and some not?
Investor-owned utilities like Minnesota Power or Xcel Energy are regulated to ensure that profits are reasonable to investors, yet fair to ratepayers. Electric cooperatives are “self-regulated” by the board that members elect on their behalf. The board is responsible for establishing a reasonable margin to operate the business safely and reliably and pay down debt required by lenders and expected by members.
How many cooperatives are regulated by the Minnesota Public Utilities Commission?
Minnesota has 45 electric distribution cooperatives. Only one cooperative has opted for additional oversight and regulation by the MPUC.
What benefit is there to regulation?
Regulation is a benefit to those who would appreciate duplicate oversight by the state. State regulation adds layers of financial review to a process that is already under local member control and authority through the board of directors.
Are there negative impacts to regulation?
The primary issue is the added cost that will mean higher electric rates. The Minnesota Department of Commerce charges an automatic fee each year for regulated utilities. Required quarterly, seasonal and annual paperwork filings, and required member mailings are expected to cost more than $200,000 each year. Rate cases, expected every two to four years, will add a minimum of another $500,000 whenever the co-op files for a rate case.
Why is the cost of power increasing?
After several increases in the cost of power in late 2008 and early this year, the price we pay for power from Great River Energy, our supplier, has largely stabilized over the last six months. Legislative mandates; investments in cleaner, greener energy; changes in a market-based transmission system and an unplanned maintenance outage at GRE’s Coal Creek station in 2008 caused power costs to increase significantly in late 2008 and early 2009.
What is Lake Country Power doing about this?
We are analyzing the cost and other impacts (such as a loss of local member control over decision-making.) We have been working hard to communicate the issues behind the rising cost of wholesale power. We have held 17 face-to-face meetings with members in 2009. We intend to hold more in 2010.
Our view is that it’s best to work with members to find solutions that meet our mission of providing safe, reliable and affordable electricity to the rural areas that we serve.