CEO Chris M. Spears

I am writing to provide you with an important update pertaining to electric rates. Since the 2021 Annual Meeting, I have been communicating that we were getting closer to the time when rates need to be adjusted.

Our operating costs have gone up, some of them significantly, primarily due to the highest inflation experienced in 40 years. It is no different for you in your home or business, nearly everything that you buy has increased in price.

For your electric cooperative, items such as transformers and conductor have gone up 30%. This situation is compounded by the growing need for more facilities at higher cost and to maintain reliability, our Cooperative is currently constructing two new substations and is planning three more along with two upgrades. I have been told by our Engineering Department that we have the most expensive construction work plan (CWP) in our history. Our CWP has fluctuated somewhat but have steadily become more costly. In 2024, the CWP is projected to be $22 million whereas just a few years ago our CWPs were less than $14 million. Consequently, more money is being borrowed to fund construction and the cost to borrow money has increased as well since interest rates are higher. All of this adds to the pressure to make a rate adjustment to maintain the level of service that you expect and deserve.

A little over a year ago, I announced that we would be implementing the Equalizer, to offset shortfalls in revenue projected for 2023. The primary benefit of the Equalizer is that it can easily be adjusted up or down as needed. We implemented the Equalizer in April and adjusted it periodically as it has been reviewed each month. It started at $3.75 per 1,000 kWh in April, dropped to $3 in June and then to zero in July through September. We raised it to $5 per 1,000 kWh in October and that is where it remains today. Considering that the last actual rate change took place in 2013, I consider our Cooperative to be blessed that a rate adjustment was avoided for such a long period of time. I know that during the last 10 years, cell phone bills, cable TV bills, video-streaming services and internet provider costs have all gone up in price. Because we are owned by those we serve, we have sought to be good stewards and that has helped in prolonging the rate adjustment until this time.

Considering that the last actual rate change took place in 2013, I consider our Cooperative to be blessed that a rate adjustment was avoided for such a long period of time....I hope it is evident that we sought to avoid a rate change as long as possible and that we have attempted to limit adjustments and the impact on you.

Recently, our third-party consultant, Booth and Associates, completed a Cost-of-Service Study (COSS) and rate design for South River EMC. The primary findings of the study confirmed that our Grid Access charges need to be adjusted along with an increase in energy charges, in most cases. To help minimize the impact on you, adjustments will be phased in over the next three years.

The COSS and rate design were first shared with the Board of Directors in November by our rate consultant. In December another meeting with our rate consultant took place and at that meeting, the Board approved an adjustment that will begin in April. The adjustment includes an increase to the residential Grid Access charge of $6 per month. It is currently $25 and will increase to $31 per month. Once this change takes place, the Equalizer will drop to zero. Hopefully, an Equalizer assessment will not be needed afterward in 2024 but if it is, it should be minimal. Grid access charges cover fixed expenses necessary to connect to the grid and electricity availability, even if no energy is used. Grid access charges are associated with the operation, repair and maintenance of the distribution and transmission system, depreciation, property taxes and more. According to the COSS, grid access charges for residential accounts should be at least $40. Since the Grid Access charge is not adequate, the deficiency is being made up in energy charges. Energy charges will remain the same in 2024. It should be noted that 12 of the 26 electric cooperatives in North Carolina are charging $30 or more per month for grid access charges. Our rate consultant advised that grid access charges pertaining to other rate classes be adjusted as well with one exception. Regarding large general service rates, a slight change in the demand charge was recommended and approved.

The recommendations by our consultant also included lowering the on peak energy charges for time-of-day rates and changing the net Metering adder to avoid subsidization of solar accounts by other rate classes/members. It is anticipated that additional modifications to rates will be implemented in 2025 and 2026 but we want to further analyze our financial status and options later before final determinations are made.

As we continue to face inflation and higher costs, I want to encourage you to reach out to the Advise Guys. They can assist you with expert advice on how you may be able to reduce your electricity use, which will help lower your electric bill. Your local electric cooperative offers time-of-day rates, smart thermostats, water heater controls, rebates on energy-efficient appliances and HVAC equipment and more. There are several helpful online tools too, including videos.

As I close, I want to reaffirm my commitment to you. I sincerely believe it is all about the members and I hope it is evident that we sought to avoid a rate change as long as possible and that we have attempted to limit adjustments and the impact on you.