In recent years, most of the operational revenue requirements were collected within the energy charge for each kilowatt hour consumed. Over time, as the electric industry evolved and the cost of the infrastructure and overhead increased, it became necessary to recognize that certain costs of service are relatively fixed, while actual electricity usage varies from month to month, as well as from one member to another. Utility providers across the nation have seen a shift in rate structure from the variable energy charge to the fixed service access charge. To ensure equitable distribution of costs amongst members, rates have been realigned between the fixed rate for service and the variable rate of electricity usage.
Rate design entails a balancing act between meeting our revenue needs, while minimizing the financial impact to our members. As a not-for-profit organization, we are required to collect enough revenue to meet expenses and maintain sufficient margins to reinvest in our electric distribution system. In September 2021, Prairie Land announced that a planned rate study had been initiated, using Power Systems Engineering as an independent rate consultant. The rate study calculated how much revenue is required to operate successfully, then identified how much each rate class is responsible for to meet the revenue requirement. Finally, those amounts are compared to the revenues that are currently being collected from each rate class to determine where deficiencies have emerged. This provides the information needed for the Board of Trustees to redesign the rates to ensure adequate and fair revenue collection.
On Tuesday, November 23, 2021, the Board of Trustees held a member rate meeting at the Norton office to review and vote on proposed rate changes. While the Cost of Service study indicated a need for a 3.9% increase in overall rate revenue, the amount of the rate change will vary by rate class, with some rate classes requiring more than the average, while others may need little or no increase. The majority of the proposed rate increase is taking place within the Service Access Charge to better align with the Cost of Service which ensures recovery of fixed costs that are incurred before a single kilowatt hour of electricity is used. Additionally, other components of the rates, kilowatt hour and kilowatt demand charges were updated to align with the new rate structure. After a thorough discussion, the Board approved the proposed rate changes, which provides an overall revenue increase of $4.6 million to be implemented over a period of three years.
We would like to assure our members that we will continue to work hard to power your life reliably and affordably. Even after the necessary increase, Prairie Land’s residential rates continue to be among the lowest when compared to rates of other electric cooperatives in Kansas. To view the complete approved rate tariffs, access https://www.prairielandelectric.com/rate-schedule-tariffs.