Cost is more than the commodity

Posted Dec 28, 2016 in Country Lines, Rates, Reliability, Views

When did you last enjoy dinner out? Maybe it involved an elegant setting with soft music, candlelight, and chefs with fancy pleated hats preparing your food. Or maybe, like my own last experience, it involved a colorful play area, aroma of greasy fries, and a teenager in a paper hat taking orders and handing off trays.

Whether it’s a burger under golden arches or a filet served with fine silver, when we enjoy an evening out we purchase more than the commodity. We pay for people to prep, serve and clean. We pay for the facility’s utility costs and building maintenance. We even pay for the paper or linen napkins used to wipe our faces. Most of all, our purchase provides some sort of profit for the owner or shareholders. Yet all I saw on my most recent experience was a burger combo meal for $6.39.

There are fixed costs behind all retail and service experiences. The facility has to be open and staffed, whether or not anyone stops. It’s the cost of doing business.

Your electric service is no different. You make choices everyday about how you use the commodity, the kilowatts that run through your meter. But there are significant costs to ensuring that you can access those kilowatts 24/7; items like labor, buildings, vehicles, substations, poles and wires.

Our 2016 cost of service study showed that the cost of making electricity available to every residential member is $39.16 per month.  It doesn’t matter if the meter ever turns; it’s the fixed cost of ensuring the commodity is there when you need it.

Fixed costs are currently represented in the $18 Monthly Service Charge and the Distribution Charge, which is variable based on the kilowatts used. So members using more energy are paying more for our operational costs of doing business.

Your board wrestled with tough conversations about how to equitably spread fixed costs, and in April will vote on a proposed four-year plan to shift these costs to the Monthly Service Charge. Details of the open meeting will be shared in the April magazine. Most members will see minimal impact on the bottom line. Those using significantly less energy will see some increase, and those using significantly more will see some decrease as fixed costs will no longer be tied to usage.

There is one important distinction between your co-op and other retail providers: our goal is not to make a profit because ultimately any margins are allocated back to you and other member-owners. Our goal is to create a better experience through innovations and solutions. That’s the co-op difference.

By Team Midwest
Team Midwest is the #UtilityoftheFuture, a member-owned utility that embraces innovation and seeks to meet and exceed member and customer expectations with a commitment to premium customer care and a first-in-class service experience.

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