Rates for most Salmon River Electric Cooperative customers are pegged to increase effective Christmas Day.
In a Nov. 25 letter to co-op members, Manager Ken Dizes explained the reasoning behind the rate increases, and in one category, the decrease.
Board members voted Nov. 20 to increase rates, Dizes said in a separate interview, after they realized they’d taken every possible step to absorb the latest increase in costs the co-op pays Bonneville Power Administration, the wholesale source for Salmon River’s electricity. Bonneville has raised its rates about every two years, Dizes said. The local co-op pays Bonneville 30 percent more today than it did in 2011, he said. Local rates haven’t been increased since 2016, but SREC pays Bonneville 10 percent more today than it did in 2016.
To avoid raising rates to Salmon River Electric customers every two years as well, Dizes said the co-op first focused on streamlining all of its business practices. That’s included cutting staff to 13, from a high of 17 employees. Reading meters automatically was a key part of streamlining.
“We don’t have any more room to move there,” Dizes said. “Our non-power costs are cut as much as we can cut them, but (expenses) keep going up and the only way we can recoup higher costs is to raise rates.” The cooperative has two ways to get money, he said — via rates paid by customers or by borrowing money.
“We don’t want to borrow for day-to-day business,” Dizes said. Of course, the co-op borrows for capital and long-term improvements, he said. Because it’s a non-profit cooperative, SREC doesn’t have excess capital. Rather, that money is returned to members via capital credit payments.
“We don’t enjoy having to raise rates,” he said. Board members and SREC employees are also co-op members and customers and they pay the higher rates along with all the other members, he pointed out. “They all feel the pain of our customers. But the board has a fiduciary responsibility to members.”
Board members agreed it’s probably easier for co-op members to pay their bills when the increases are smaller, although perhaps more frequent, than to wait many years and then increase rates by a much higher percentage, he said. Most people budget their expenses to handle small increases in almost all areas, he said, because most things continue to cost more every year.
“Little increases let us avoid spikes,” he said. “And it lets people make minor adjustments.”
The cooperative’s customer base and retail sales are, at best, remaining flat or shrinking, which also contributes to upward rate pressure, he wrote in the letter. People don’t want Challis to grow, he said, “but a stagnant base means higher costs.”
Residential customers will pay 3 percent more effective with bills received in January. Likewise, the access fee for residential customers is increasing by $2 a month.
Dizes acknowledged that “right off the bat,” residential customers will pay $24 more per year for electricity. Access charges are calculated to cover the permanent fixed costs of each rate class. The intent, he said in the letter, is to capture at least 75 percent of fixed costs via the access charge. The access fee is not increasing for all classes, Dizes said, because the fees set in some classes cover those costs now.
Rates charged for 3-phase irrigation customers are going up by 6 percent. RV park demand customers are seeing the highest increase, 11 percent. Single phase irrigation customers will pay 1 percent less. Rates for 3-phase and 1-phase commercial customers, RV park non-demand and dusk to dawn lighting customers won’t change.
Dizes had been telling members for about a year to expect a rate increase this year. In fact, he initially thought the increase could be as much as 10 percent. He later revised his estimate to 5 or 6 percent, before finally determining it would be 2.6 percent.
Salmon River’s service area extends from Stanley to the top of Galena Summit, up the East Fork, into Challis, the Pahsimeroi Valley, half-way to Salmon, to the top of Galena Summit and to this side of Banner Summit. The co-op has 2,800 accounts with an average of 3.5 customers per mile of line. For comparison, a utility like Rocky Mountain Power or Idaho Power has between 35 and 60 customers per mile of line, Dizes said.
“We’re kind of proud of what we do and that we do it an affordable rate,” Dizes said.