Rate design is a balancing act between meeting revenue requirements and minimizing the overall financial impact on members. As a not-for-profit organization, Horry Electric must recover the cost of doing business, as well as maintain sufficient margins to reinvest in its electric distribution system.
Horry Electric’s last price increase was in 2003. “In 2005, we sounded the alarm about the dramatic increase in wholesale power costs, and they haven’t slowed down since,” says Danny Shelley, chief financial officer for Horry Electric Cooperative. “The past six years have been very challenging for our cooperative and we’ve taken every action possible to delay or put off the inevitable,” he continues. “At some point, the scales have to balance.”
Bottom line, Horry Electric’s cost of power has increased 53 percent since 2004. “More than 23 percent of that hit us in just the last three years,” says Shelley. “We can’t do anything about the cost of power, but we can all do something about the amount of energy we use and how we use it,” he continues. “Implementing a 3.1 percent increase from current rates may be a shock, but it doesn’t come close to the harsh reality of the increased cost of power.”
“We’ve been able to avoid routine price adjustments in reaction to the market in spite of virtually all other aspect of today’s cost of living having increased,” says Shelley.
The adjustment now being made by the cooperative was carefully thought out and planned, even down to the length of time between the original announcement in April and the date of actual implementation. “As Mr. Howle pointed out in his monthly column in South Carolina Living magazine, we’re especially sensitive to passing along pricing information in a timely manner,” says Shelley.
Another contributing factor is that the new rates are seasonal. “Instead of having one year-round rate, we’ll have a summer rate and a winter rate,” explains Shelley. “The summer rates are higher because demand costs are higher. Fuel costs are also notably a good bit higher in the summer.
“Implementing new rates when electric bills are potentially high due to extreme weather wouldn’t have been fair to our members,” explains Shelley. “So, we decided to put the new winter rate schedule into effect on what will be its usual starting date each year.” Summer rates will go into effect in June of 2012.