Dear Members,

With all the dramatic changes occurring within the electric utility industry, we place a high priority on preparing Randolph EMC to meet your future needs and expectations. To do this, your cooperative continues to invest heavily in upgrading and improving our electrical infrastructure to increase reliability and to meet increasing load requirements. We have a responsibility to continue delivering the same value, high-quality service and reliability that our member-owners have come to expect, well into the future.

Our lenders require that we maintain certain equity levels and other key standards to meet their requirements for borrowing money to invest in REMC’s electrical system. Your Board of Directors has also committed to making substantial capital credit retirements whenever feasible so that you receive one of the monetary benefits of being a cooperative member-owner. It is challenging at times to hold rates stable, retire capital credits and build and maintain a reliable electric system.

Your Board of Directors and management team also have the fiduciary responsibility to periodically review Randolph Electric’s cost of doing business and adjust rates as needed to recognize the changing cost of serving our members. This is to ensure the different rate classes—non-commercial, commercial, industrial and lighting—are paying their fair share of the expenses to generate and distribute electric energy to your homes and businesses.

We work hard to keep electric rates stable for our members and have been able to hold the line on rates for several years. The last time we had a retail rate adjustment was in 2016. As I noted in my comments during last year’s virtual Annual Meeting, the cooperative engaged an independent rate consultant, the National Rural Utilities Cooperative Finance Corporation, to review our current rate structures. The purpose of this study was to determine if the revenues we receive are reflective of the cost for providing service to our members.

Your management team continually evaluates our operations to look for efficiencies in order to contain and reduce our operating costs as much as possible. But the costs to build and maintain the electrical system have risen dramatically in the last few years.

Even though we have switched to less-expensive transformers, since 2016, the transformer costs for our two most-used transformer sizes have gone up 21 and 25 percent, respectively. We utilize contractors to assist us with power line construction and right-of-way maintenance. As these contracts expire, we rebid the work so we can receive the most competitive pricing. Since 2016, our construction contract bid work has increased by 15 percent.

Maintaining a strong right-of-way maintenance program is critical to reducing outages and improving outage response during storms. Our team has implemented cost-saving measures for our right-of-way program while still meeting the required maintenance schedule for each circuit. Our adoption of advanced meters several years ago to allow for two-way communications to devices in the field helped reduce costs and improve efficiency immensely.

Reflecting back to when I became your CEO in 2000, the number of accounts we serve has increased by over 4,800, 17 percent, to 32,700. The miles of line we service has increased by 640 miles, to over 4,400. Yet we have fewer employees working at the cooperative today than we did in 2000 because of our focus on operating as efficiently as possible.

Providing tools like FlexPay, high-usage alerts and Levelized Billing allows you to have more control and manage what you pay for energy. We also offer free energy advisor assessments, so when you see an unusual increase in your energy usage, we can help you find the problem and offer a solution.

As I noted earlier, the Randolph EMC team works hard to operate your co-op efficiently. We have done a lot of things to keep our costs in check and delay a rate increase, but we are at the point where we have to make a slight overall rate adjustment. The management team worked with the consultants and made recommendations to the Board of Directors for adjustments to our current rates. After reviewing and discussing the findings, the Board of Directors approved a rate adjustment that will become effective on April 1, 2022.

The good news is, for the average member, the rate adjustment is minimal.

Basic Facilities Charge

The Basic Facilities Charge is a component of the power bill that’s included in every electric utility’s rate schedule and is designed to cover some of the cost of the power delivery system. Many other utilities—such as your home phone, cell phone, cable, satellite or streaming TV service—include some sort of monthly charge to cover the cost of providing their services, as well.

For Randolph EMC, basically, everything it takes just to deliver the energy to your homes and businesses makes up Basic Facilities. This includes the capacity to deliver energy, transmission lines, substations, distribution lines, poles, wire and transformers. This charge is also designed to cover any required maintenance on the system and the cost to restore power when the lights go out, as well. In most cases, as with Randolph EMC, electric utilities also collect a portion of the Basic Facilities costs within the energy charge portion of the bill.

The cost analysis showed the average actual Basic Facilities cost for Randolph EMC’s non-commercial residential accounts is $61.20 per month, which is significantly higher than our current charge of $25 per month. Therefore, after much consideration, the new Basic Facilities Charge will be increased to $30 per month to reflect the actual cost of providing electric service more fairly.

Rate Adjustment

The overall rate adjustment, including the Basic Facilities change and the energy rate, that will go into effect on April 1 will raise REMC’s revenue for all classes by 5.79 percent.

That does not mean the average residential member’s bill will increase by 5.79 percent. The change in our Wholesale Power Cost Adjustment (explained in the next section) will mitigate much of this increase and, in the case of the average residential member, will actually result in only a slight increase. Based on kilowatt-hour (kWh) usage data, the average residential member is defined as a member using about 1,015 kWh per month.

Wholesale Power Cost Adjustment

The Wholesale Power Cost Adjustment (WPCA) is currently a credit of $3 per 1,000 kWh. Beginning on April 1, 2022, a credit of $8 per 1,000 kWh will be reflected in each member’s bill. We project this credit to stay in place through the remainder of 2022, and depending on future Wholesale Power Costs, a credit to also apply in 2023.

The Bottom Line

Now, let’s get to the bottom line and answer the question most of you are asking— “How much will I be paying after this rate adjustment?” To help illustrate the details of this rate adjustment, the chart included compares the old and new rates.

To keep it simple, we’ll look at a residential account that uses an average of 1,000 kWh per month. This comparison also takes into account both the summer and winter rate schedules.

When comparing the change in Basic Facilities Charges, increases in energy charges and the transition to a higher WPCA credit, you can see that the net impact to the average member is a 2.3 percent increase over the previous rate structure. When compared to the 2022 calendar year, the increase amounts to 1.69 percent over 2021.

I have tried to simplify the specifics of this rate adjustment to show you how it will impact your monthly bill. The new rate schedules are available on our website at RandolphEMC.com, or you can always contact one of our offices with questions. I ran through a local fast-food drive-thru today to grab some lunch.

I paid more for my “value meal” for lunch than what the average Randolph EMC residential member pays for the electricity they use in a 24 hour period, even with this rate adjustment. Electricity is the most stable, and I believe the most valuable, energy resource we have today. Just think of all the different things you use electricity for in a 24-hour day.

At the conclusion of our employee meetings, there’s a quote that I have used for many years. “Remember who we work for, the people we look in the eye, are our owners and the reason we’re in business.” This helps us keep our focus on what’s important.

Implementing a rate adjustment is never an easy thing to do. But I am pleased with all the work that has been accomplished over the years to lessen the impact to you as much as possible.

Cooperatively Yours in Safety,

Dale F. Lambert, Chief Executive Officer