Current Economic Environment
As a not-for-profit cooperative, United Electric Cooperative is committed to providing its member-owners with safe and reliable electricity at cost. This means United Electric must maintain a strong internal focus on controlling costs and operating efficiently.
The marketplace for equipment, materials and supplies of key components essential to utility operations is experiencing global shortages of raw materials, labor and increasing demand in our domestic markets. In recent years, constraints in the supply chain have also caused disruptions in United Electric’s access to goods and services vital to its utility operations. These factors have led to unprecedented price increases for utility equipment.
However, these cost challenges pale in comparison to the direct effect that increased power supply expenses have on the utility. To put this in perspective, according to the U.S. Energy Information Administration, in 2017 the Mid-C (the Pacific Northwest power trading hub) peak annual average market price of power was $26.04 per megawatt-hour. In 2022, the average price was a staggering $92.81/MWh, and in 2023, the year-to-date average price is $91.90/MWh. Although market prices are just 1 of many components used to determine wholesale power costs, they demonstrate the cost pressure United Electric is up against.
Wholesale power supply costs are more than 68% of the total operating expense for United Electric, and the cost of power has a direct effect on member rates. Fortunately, through prudent planning and efficient operations, United Electric has not required an overall rate increase since 2017. In contrast, over the past 7 years, United Electric has returned approximately $3.6 million to its members in rebates and nearly $3.6 million in capital credits.
Amid increasing cost of materials, equipment and operations, United Electric is committed to continued cost management and efficiency in planning and operating the electrical system to keep rates stable without compromising service. Despite these efforts, cost-of-service studies show United Electric must increase its rates to cover the cost of wholesale power and operational expenses.
While final numbers have not yet been presented to the United Electric Board of Directors for approval, we anticipate rate increases will be required in 2024 and 2025. We are sensitive to the current economic environment, but we must take action to maintain a cost-effective operating budget on behalf of the cooperative’s members.
We sincerely appreciate your trust as we strive to keep United Electric’s rates among the lowest in Idaho and the entire nation while protecting our members’ interest in the cooperative.
Thank you,
Michael Darrington