Between the lines: The anatomy of a rate
By Gwen Kautz, General Manager
gkautz at dawsonpower.com
We have approximately 24 rate classes at Dawson Public Power District serving just over 23,400 meters. The primary difference in each rate is the size of transformer needed to deliver power to the account; but it isn’t the only factor. We look at other criteria, such as the demand needs of that service as well as the purpose. A majority of our customers fit into residential (general service), small power or irrigation rates.
When determining what to charge in these rate classes, our cost of service study looks at several factors, such as setting rates up to be non-discriminatory, balancing the need of the district against the customer impact, adhering to a consistent methodology used over time and controlling costs that impact rates. Each rate class should stand on its own – that is to say one rate class should not subsidize another.
The district must develop allocation factors for each rate. In other words, each rate gets a piece of our plant investment (the poles, wires, meters, etc.) and each rate is given a piece of the expenses (labor, maintenance, etc.) associated with maintaining that plant. The Dawson PPD Board is responsible for ensuring that rates are developed to be fair and non-discriminatory, that they have a minimal impact on our customers, are competitive, provide a pricing signal, are understandable and encourage proper usage. Each facet of rate making is based on how we are billed by our wholesale provider.
Controlling costs is my job. We look at revenue requirements by adhering to a strict budget that is approved by the directors every year. Each budget piece is considered carefully – looking at need versus want. We “need” a reliable system but we “want” technology. Some technologies are not yet cost effective and are discarded.
Rates are designed to cover our operating cash expenses, provide plant additions, keep some general funds reserves and allow for margin that is required to meet financial goals and objectives. Unexpected costs or a decrease in kWh sales, just like your home budget, creates a problem resolved by adjustments and time.
Sales vs. the weather
While most of our rate classes perform consistently throughout the year – and are somewhat predictable, the weather impacts us significantly. For example, in 2012 we had an exceptionally hot and dry summer which impacted our irrigators and caused an increase in kWh sales. This year, the weather has been wetter, reducing sales that we had anticipated. As hard as we try to adhere to the budget month after month, Mother Nature can throw a major kink in things.
This year our board has embarked on a detailed rate education program. Each rate is being evaluated and explained in greater detail as it relates to the billing impact from our wholesale provider and how those costs are passed on to the customer. The goal is to ensure each rate class is paying its appropriate share based on the allocation information mentioned above.
If you are interested in more rate information, please contact me or call our office. Otherwise, our rates may be found on our website.