CEO Column: Factors that Impact Electricity Prices
September 1, 2023
I was recently asked by a Member about what impacts electricity prices. We talked about how the daily cost of living seems to have increased across the board.
Just as inflation has impacted everything from the price of gasoline to the price of eggs, costs for the poles and equipment we use and the fuels required to produce electricity have also risen. This is a timely topic, so I wanted to help explain some of the factors that impact electricity prices and energy bills.
While there is no short answer, there are a few key elements that impact electricity prices and rates. Some of these factors Trico can manage, some of them you can impact, and other factors are beyond our control. So, let me break it down.
There are three primary parts to your monthly electric bill: a fixed monthly charge, an energy consumption/kWh charge and a Power Cost Adjustment (PCA). To understand your total energy costs and what impacts your bill, lets unpack one piece at a time.
The first is a fixed monthly charge, which covers the costs associated with providing electricity to your home. This includes equipment, materials, labor and operating costs necessary to serve each meter in Trico’s service territory, regardless of the amount of energy used. In order to ensure the reliable service you expect and deserve, we must maintain the local system, including power lines, substations and other necessary equipment. Like many other businesses, we’ve experienced supply chain issues and steep cost increases for some of our basic equipment. For example, the cost for a distribution transformer (which looks like a long metal can at the top of a power pole) has risen by as much as 400 percent since 2020, and wait times to receive this essential equipment are up to 52 weeks.
Because we are a not-for‑profit cooperative, some of these expenses must be passed on to our Members. I should note that the service charge is the same for everyone in a rate class and the costs are shared equally across the membership.
Another component of your monthly bill is the kWh charge, which covers how much energy you consume. You’ve likely noticed the amount of energy you use can vary from month to month and is typically impacted by extreme temperatures. When temperatures soar or dip, your cooling and heating equipment run longer, which increases your home energy use. Regardless, energy consumption is an area that you have some control over, and you can lower your monthly bill by actively reducing energy use. Your thermostat is a great place to start. Adjusting your thermostat up or down a few degrees can save you money and keep you comfortable.
The last component of your bill is the PCA. The PCA is affected by the cost of power that Trico purchases from our wholesale provider. The PCA covers fuel cost fluctuations without having to continually restructure electricity rates. Trico works hard to identify cost‑effective power sources and makes advance purchases when prices are low. In June, Trico reduced its PCA from 1.5 cents to 0.5 cents to help reduce bills in the summer months.
I hope this information sheds light on some of the factors that impact electricity prices. While we can’t control the weather or the rising costs of fuels, please know Trico is doing everything practical to keep costs down.
We’re here to help you, too. Contact us at 520-744-2944 if you have questions about your energy bill.