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We take managing costs seriously

June 10, 2024

You have probably heard in the news that some of the large, investor-owned utilities in the state have been increasing rates on a double-digit basis. As a non-profit cooperative, we are dedicated to providing cost-effective and sustainable energy services to our Members. We develop our rates to be affordable by focusing on recovering costs instead of making profits. We also work hard to control our costs for the benefit of our Members. This month I want to share some information on what goes into our rates and how we strive to control costs.

There are three primary categories of costs in our business: power supply, operating, and fixed. Power supply is the cost to generate power and the cost to transmit power to our system (transmission costs). Operating costs include billing, outage response, preventative maintenance of our system, legal costs, employee training, headquarters maintenance, property and casualty insurance, wages and benefits, director expenses, regulatory expenses, etc. Fixed costs include interest on long-term debt and depreciation of our assets.

Regarding operating costs, Trico has lower operating costs per kilowatt hour (kWh) today than we did 10 years ago. Trico has kept operating costs per kWh sold essentially flat for the last 10 years whereas across Arizona and the country, they have consistently risen. Our power costs per kWh sold have been essentially flat over the past 10 years and are lower than they were 15 years ago.

Additionally, since the mid-1980’s (almost 40 years ago) our rates have increased by about half a percent per year. In other words, our rates have gone up considerably less than the rate of inflation for the past 40 years, which means our Members are paying less today than they were in 1986 on an inflation adjusted basis.

We have accomplished this by always focusing on our Members and working to be efficient. Trico’s number of employees per Member ranks among the top 20% of U.S. electric cooperatives in terms of efficiency. We take pride in providing excellent service while controlling operating costs.

Like all companies, over the last several years, Trico has seen significant increases in the cost of materials, supplies, labor, fuel, power supply, and equipment. This is something we need to address as we want to maintain our financial strength and we don’t want to compromise the maintenance of our system. Reliable service is one of the ways we provide great value to our Members.

With this in mind, Trico is planning to file a rate proposal this year with the Arizona Corporation Commission (ACC) that will likely result in a modest upward adjustment in rates and will go into effect in late 2025 or 2026. Our last rate proposal was filed in 2015 and was approved by the ACC in 2017, so it will be about eight years between new rates.

We are currently working on a Cost-of-Service Study (Study) that will determine what will be included in our rate proposal. This Study is designed to identify what we need to recover in rates to cover our costs and produce a margin needed for healthy operations. As we complete the Study, we will share what you can expect on your bill. Our approach to this process will be guided by our mission of providing cost-effective and sustainable energy solutions to you, our Members. As always, thank you for being a valued Member of Trico Electric Cooperative.