2023 RATE CHANGE COMMUNICATIONS

LREC has been discussing the 2023 rate change since November 2022 during member meetings and in our newsletter NewsFlashes. Below are all rate communications published in NewsFlashes. If you would like to see how the rate change impacts you personally, LREC built a rate calculator. Type in your information to see what changes are expected for your service for the next year. The rate change took effect September 1, 2023.

Inflation and Natural Gas Prices Drive the Need for Additional Revenue
With the rate of inflation and high cost of natural gas increasing Great River Energy (GRE) wholesale costs, we are anticipating the need to collect more revenue within the next 12 to 18 months. We anticipate an approximate 6% increase in GRE wholesale costs in 2023, which represents approximately $1,800,000. It is becoming clear that we will need to pass these higher wholesale costs onto the membership. Your board of directors is evaluating the situation to determine the best plan for generating the additional revenue that is anticipated, and such plan will likely lead to an increase in our general service rates. We do not like rate increases, but when they are necessary, we analyze and determine them in a manner to ensure that LREC can cover all its fixed costs. As mentioned in last month’s newsletter, there will be a Demand Side Management (DSM) rate increase effective January 2023.

Any such rate increases necessary to generate additional revenue needed would not be driven by LREC or caused by LREC, but rather they would be driven by natural gas price increases and inflation that hasn’t been seen for decades. The landscape affecting rates is changing very rapidly. By staying vigilant and staying on top of the massive changes impacting our world and industry right now, and upon receiving new information from GRE, our team has been planning, budgeting, and doing everything we can to mitigate the impact of potential rate increases.

Your board continues to move forward to reach decisions that are in the best interests of the cooperative. An absolute priority of ours is to make sure we keep this topic and related discussion on the table through newsletters, Facebook, and other forms of communication, so that we can be assured that we have done what we can to properly keep you informed of the decisions that will affect our rates and clearly explain the reasons supporting such decisions.

We have only had one general service rate increase in the last decade. LREC has been proactive in lessening the impacts of things outside of its control to maintain rate stability. This proactive approach remains strongly in place today, so that we may continue to plan in a manner that is in the best interests of our cooperative.

LREC’s wholesale power costs from Great River Energy (GRE) are rising due to increases in the wholesale power markets, which are primarily driven by the wholesale natural gas market. Earlier this year, LREC completed a cost of service study. The results indicated that our facility charge wasn’t recovering the fixed costs required to provide power to each service (poles, wires, transformers, substations, meters, etc.). By increasing our facility charge to match our cost of service, we were able to lower our energy rate across all rate classes. The result is a 5% annual increase for the average member.

As announced last month, due to rising wholesale power costs from Great River Energy (GRE), Lake Region Electric Cooperative (LREC) is raising the general service rate (effective September 1st, 2023). GRE’s power cost increases are due to rising prices in the wholesale power markets (which are primarily driven by the wholesale natural gas market). This will result in a 5% annual increase for the average member.

The increase will primarily be in our facility charge. A cost of service study from earlier this year indicated that LREC’s facility charge wasn’t recovering the fixed costs required to provide power to each service — such as poles, wires, transformers, substations, meters, and the like. These costs are the same regardless of the amount of electricity each home uses. By increasing our facility charge to match our cost of service, we were able to lower our energy rate across all rate classes.

Why is the facility charge increasing? A recent cost of service study showed that our facility charge is not covering our fixed costs to deliver power to our members. When it was determined that LREC needed additional revenue due to increases in wholesale power costs, along with other inflationary pressures, the Board of Directors voted to restructure our rates to match the results of the cost of service study. This resulted in an increased facility charge and a decreased energy rate.

What is the purpose of a facility charge? There are a number of fixed costs to deliver power to a service; including poles, wires, transformers, meters, trucks, etc. These are costs incurred by LREC whether or not energy is being used at a service or not. The purpose of a facility charge is to ensure these costs are properly being recovered—regardless of how much energy is consumed. LREC, along with other electric utilities, bills a separate fixed facility charge in addition to a metered energy cost.

Why is the facility charge so high? LREC has approximately five members per mile of line, while investor-owned and municipal utilities have 40+ customers per mile. This means LREC has fewer members to share those costs compared to an investor-owned or municipal utility, resulting in a higher facility charge. Even with the higher facility charge, LREC collects less revenue per mile of line than investor-owned and municipal utilities.

Electric co-ops have less consumers per mile of line than investor-owned and municipal utilities (Lake Region Electric Cooperative has even less than the national cooperative average). LREC has approximately five members per mile of line, while investor-owned and municipal utilities have 40+ customers per mile. Because LREC has fewer members to share those costs, the facility charge is higher. In spite of the higher facility charge, LREC still collects less revenue per mile of line than investor-owned and municipal utilities. However, we always go the extra mile for you—the members we proudly serve.

How will the September 2023 Rate Changes Impact Members?
The chart below shows the average residential member’s rate change at various usage levels (for the rates that are going into effect September 1st, 2023). We are also offering a customized estimate that gives members an opportunity to see how their bill will specifically be affected by the rate changes. There are two ways to see this:

1) LREC employees will be providing a rate booth at our Annual Meeting on April 13th. Simply visit the booth and they will look up your information.

2) Members can also check it out via our new online bill calculator available at https://ratecalc.lrec.coop.

See How Upcoming Rate Change Affects Your Bill
We’ve worked hard to ensure our members are fully informed about our upcoming rate change to our general service rate in September. At our district meetings in January and our annual meeting in April, we provided a rate booth where members could preview what their bill might look like after the increase. We have also made an online bill calculator that is available at https://ratecalc.lrec.coop — scan the QR code to the left to visit.

Why are rates increasing? The rate change is due to rising wholesale power costs from Great River Energy (GRE). GRE’s power cost increases are due to rising prices in the wholesale power markets (which are primarily driven by the wholesale natural gas market).

How much are the rates increasing? The average member will see an average annual increase of 5%.

When are rates changing? Our general service rate change will take effect September 1st, 2023. Our off-peak rate increase was implemented January 1st, 2023.

What is a Facility Charge and Why is it Increasing in September?
As announced at the beginning of 2023, Lake Region Electric Cooperative (LREC) is raising the general service rate (effective September 1st, 2023). This is due to rising wholesale power costs from Great River Energy (GRE).

The increase will primarily be in our facility charge. A recent cost of service study indicated that LREC’s facility charge wasn’t recovering the fixed costs required to provide power to each service — such as poles, wires, transformers, substations, meters, and the like. These costs are the same regardless of the amount of electricity each home uses. The purpose of a facility charge is to ensure these costs are properly being recovered regardless of how much energy is consumed.

LREC, along with other electric utilities, bills a separate fixed facility charge (cost to provide service) in addition to a metered energy cost (cost of electricity). By increasing our facility charge to match our cost of service, we are able to lower our energy rate across all rate classes.

The typical member will see an average annual increase of 5%. If you are interested in seeing how the rate change affects you, we have made an online bill calculator that is available at https://ratecalc.lrec.coop — simply scan the QR code to the left to visit. As always, if you have a question or concern that isn’t addressed, you can reach out to us at

(800) 552-7658 or via our online chat at www.lrec.coop.

Rate Increase Facts
At Lake Region Electric Cooperative (LREC), transparency and open communication are core principles in how we interact with our members. We have endeavored to explain the upcoming general service rate increase (effective September 1st, 2023) in detail so our members are well-informed. We’ve compiled a list of frequently asked questions below for your convenience. If you have a question or concern that isn’t addressed, you can reach out to us at (800) 552-7658 or via our online chat at www.lrec.coop.

Why are rates changing? The rate change is due to rising wholesale power costs from Great River Energy (GRE),  increasing material costs, and other inflationary change.

How much are the rates changing? For residential and farm, our monthly facility charge is going from $24 to $39 and energy rates (per kWh) are moving from 10.9¢ to 9.6¢ (12.2¢ to 11¢ for summer months of June, July and August).

Can I see how it affects me specifically? If you are interested in seeing how the rate change affects you, we have created an online bill calculator available at https://ratecalc.lrec.coop.

When are rates changing? Our general service rate change will take effect September 1st, 2023 (this will be reflected on your October bill). Our off-peak rate increase was implemented January 1st, 2023.

Rate change: who, what, when, why, and where

Who: All LREC members/all rate classes.

What: Rate changes across all rate classes. The rate class relevant to many is the Residential/Farm which has the following changes: facility charge goes from $24 to $39 and energy rates (per kWh)  from 10.9¢ to 9.6¢ (12.2¢ to 11¢ for summer months of June, July, and August).

When: New rates in effect as of September 1st, 2023.

Why: Rising wholesale power costs from Great River Energy (GRE), increasing material costs, and other inflationary change. Where:  Go to https://ratecalc.lrec.coop to preview how your bill may be affected by the new rates.

RESIDENTIAL AND FARM RATES

Current Rates
Facility Charge$39.00
Summer (June, July, August)11¢/kWh
Other Months9.6¢/kWh

OFF-PEAK RATES

Interruptible Heating
Summer (June, July, August)Current Rates 
Energy Charge6.8¢/kWh
Other Months 
Energy Charge (Domestic Use)**only available for conditioned living space6.1¢/kWh
Energy Charge (Non-Domestic)6.8¢/kWh

Off-Peak Storage

Energy Charge5.5¢/kWh

COMMERCIAL RATES

Small Commercial

Current Rates
Facility Charge$70.00
Summer (June, July, August)11.3¢/kWh
Other Months10¢/kWh

Large Commercial

Current Rates
Facility Charge$100.00
Summer Demand (June, July, August)$20.00/kW
Winter Demand (December, January, February)$14.00/kW
Demand (all other months)$8/kW
All Energy6.85¢/kWh

IRRIGATION RATES

Irrigation-Single Phase

Current Rates
Facility Charge (May-September)$100.00
Controlled Demand Charge$3.50/kW
Uncontrolled Demand Charge$10.00/kW
All Energy6.65¢/kWh

Irrigation-Three Phase

Current Rates
Facility Charge (May-September)$170.00
Controlled Demand Charge$3.50/kW
Uncontrolled Demand Charge$10.00/kW
All Energy6.65¢/kWh

RENEWABLE PURCHASE RATES

Net Energy Billing Service 
Payment per kWh for energy delivered to LREC in excess
of energy used
 
With Retail Farm/Non-Farm/Seasonal/Public Bldg Service11.089¢/kWh
With Retail Commercial Service6.895¢/kWh

GRID ACCESS CHARGE FOR DISTRIBUTED GENERATION

Lake Region Electric Cooperative implemented a Grid Access Charge for Distributed Generation on new or expanded distributed generation systems (wind, solar, etc.) interconnected to LREC’s electric system beginning July 1st, 2019. Systems interconnected with LREC prior to July 1st, 2019, are not affected unless capacity is added. The additional capacity will be subject to the fee.

For residential and farm, the grid access fee will be applied monthly at $0.81/kW for each kW over 3.5 kW on facility’s nameplate to a maximum of $6.14/mo. For example, a 5 kW system would be charged for only 1.5 kW, which equates to $1.23 per month. The cooperative will review the fee annually and provide notice of any changes.

 No costFeeMonthly Cap
Residential & FarmFirst 3.5 kW at no cost$0.81 per kW$6.14/mo
CommercialFirst 3.5 kW at no cost$1.62 per kW$58.97/mo