The start of the new year also meant the beginning of lower electric rates for members of Victory Electric. For the second consecutive month, members received a one cent/kilowatt-hour (kWh) rate reduction. On average, this equaled an eight percent decrease on electric bills.
To put it into perspective, the average residential electric bill is $116.50, which meant a savings of almost $10 in both January and February. Contingent upon generation fuel prices staying relatively stable, we predict members will continue to enjoy these savings into the future.
Members are the heart of efforts
While prices seem to be on the rise for many other utilities, Victory Electric is extremely proud to pass on a rate decrease to our members. We hope it is a welcome relief that offers some light at the end of the tunnel for our members, and ultimately helps keep our communities economically viable and strong.
The decrease in the wholesale cost of power is due to a combination of many factors. First and foremost, the rate decrease is the result of the Jan. 1, 2019, expiration of the Jeffrey Energy Center Power Purchase Agreement, which allowed Victory Electric’s wholesale power providers--Sunflower and Mid-Kansas--to rebalance resources by replacing its existing generation with more economical options. In addition, favorable market conditions for owned generation resources and relatively steady fuel and contracted energy costs helped keep the cost of wholesale power lower.
Why an ECA matters
Victory Electric’s base energy prices are purposely set for long intervals, often years, in an effort to keep prices steady and protect our members from market volatility. In addition to wholesale power costs, the base energy charge includes other components such as fixed infrastructure costs, overhead and maintenance, property taxes, and interest expense. Because of the complexity and financial investment involved with changing base rates regularly, there can often be a time lag between changes in the wholesale rate and the retail base energy price. This is where the Energy Cost Adjustment (ECA) comes into play.
Each month through the ECA, electric bills are adjusted either up or down to account for abnormal “variable” power supply costs. These variables determine how much our power supplier incurs or saves in the process of generating power, to include fuel costs like coal and natural gas, power purchases, and the cost of transmission to deliver the power to Victory Electric’s system.
When the cost of wholesale power decreases significantly like it did in January and February, the ECA gives Victory Electric an avenue and the capability of immediately passing the savings on to our members. The ECA is a pass-through bill adjustment to our power suppliers, and Victory Electric’s margins are not increased or decreased by the ECA.
Based on rate data gathered from the U.S. Energy Information Administration, Victory Electric continues to provide some of the lowest electric rates in the state of Kansas. While energy markets, weather, natural gas supplies and prices, and government regulations constantly fluctuate and influence energy prices, our dedication to finding ways of decreasing the cost of power for our members reinforces Victory Electric’s commitment to providing safe, reliable power at an affordable price.