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Mountain Parks Electric, Inc. (MPEI) recently learned the magnitude of an electric rate increase from its supplier, Tri-State Generation and Transmission Association, Inc. of Westminster, Colorado. Tri-State generates and purchases wholesale power for 44 electric distribution cooperatives like MPEI, in a 250,000 square mile area of Colorado, New Mexico, Wyoming and Nebraska, serving a population of about 1.2 million consumers. The increase, which will be effective January 1, 2007, is 11.8%. Mountain Parks Electric’s Board of Directors will consider the impact of this wholesale power cost increase in its meetings this fall, beginning on September 27 th. MPEI’s annual budget for purchased power is approximately $14 million, representing about 65% of our total annual budget. The effect of the 11.8% increase will cost MPEI over $1.6 million more for power to be purchased in 2007. Additionally, like our members, MPEI has been experiencing significant cost increases in the essential supplies and materials required to operate and maintain the electric distribution system. Obviously our members are well aware of the prices of oil, gasoline and diesel fuel. Transformers and poles increased by over 40% in 2006. Copper, steel and, all metals have increased in cost even more. The MPEI Board will review all cost components of the budget in determining rates for our consumers for 2007. It is highly probable that a rate increase of 10 to 15% will be necessary in order to cover costs expected in 2007. Details of the Tri-State rate increase were announced in a press release of September 8, 2006, important portions of which are summarized in the following: “Tri-State Generation and Transmission’s board of directors has approved the power supplier’s 2007 operating budget of $991 million, which includes an increase in the average Class A wholesale rate to its 44 member electric cooperatives – from 5.1 cents per kilowatt-hour to approximately 5.65 cents per kilowatt-hour effective January 1, 2007—while cutting in half the premium charge associated with its renewable energy program. Tri-State executive vice president/general manager J.M. Shafer said that the consistent increase in demand for electricity among the 44 member systems, combined with the fact that all of the association’s existing baseload generation resources are fully committed, puts Tri-State in the unenviable position of having to raise rates in order to meet its obligations. “Until we get some new baseload generating facilities developed, we’re going to have to buy expensive power on the open market to meet the growth. Because of that, our purchased power costs are projected to increase from $204 million this year to $247 million in 2007, which makes up a significant portion of our operating budget” he said. “Along with rapid system growth, comes increased financial obligations, which must be met to maintain our fiscal stability and the continued health of our power supply infrastructure” Shafer continued. ”We’re working toward a period of operational stability by building additional facilities to meeting the growing loads, but in the meantime, we’re facing numerous challenges—and pressure on rates is primary among them.” In August 2005 the Tri-State board took action to address the pending power supply deficit when it authorized a comprehensive resource development plan aimed at adding to the association’s generation and transmission network through a series of projects over the next 15 years, which includes up to 2,100 megawatts of generation assets and the necessary related transmission infrastructure. “To move forward and return to an era punctuated by reasonably stable member rates, we must take action to strengthen our financial standing in order to acquire the necessary funds to develop these much-needed facilities. Right now we are doing everything in our power to accelerate the process of securing those new generation and transmission resources,” Shafer said. Rates charged by each of Tri-State’s 44 member distribution systems are set independently of each other and of Tri-State, depending on the specific financial and operational circumstances faced by each member system. Wholesale power supply expenses normally make up the large component of retail costs. Since the inception of its voluntary “green power” program in 1999, Tri-State has made available to all of its members energy derived from a variety of renewable resources, with a $2.50 per month premium charge on every 100 kilowatt-hour block per month sold. However, due to the current favorable conditions in the renewable energy credit market, that premium will re reduced 50 percent (to $1.25 per 100 kilowatt-hour block per month) , effective January 1, 2007.” Because Tri-State has underway a resource plan of over $5 billion for the next 15 years, I expect that we will see a number of significant rate increases, especially over the next 3 years. Mountain Parks Electric, Inc. will do every thing it can to assist our members in controlling their energy costs, with conservation, ground source heat pumps, and compact fluorescent lamps affording our members an opportunity to reduce the amount of energy they require at these high prices. Unfortunately, the global economy has drastically driven up the price of all energy, and the materials required for generation and distribution. This will be a challenging time for electric cooperatives and our members; we pledge our best efforts to assist you in any way that we can.
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