SMECO newsletter

volume 65 - issue 10 - october 2015

Rate adjustment filed with PSC

SMECO filed a request in September with the Maryland Public Service Commission to restructure and increase its Distribution Service rates. This is the first such request in more than five years. If approved, the rates are expected to take effect in March 2016, and the overall impact on all SMECO’s customer-members will be a 4.45 percent increase. With our continued success in purchasing attractively-priced power that decreased Standard Offer Service (SOS) energy charges over the past year, SMECO residential customers will still be paying about $17 per month less than last summer.

Customer bills have two main components, the Standard Offer Service and the Distribution Service. SMECO’s filing proposes to change the Distribution Service charges—a measure designed to help harden the Cooperative’s delivery system and enhance service reliability. The Distribution Service component of the bill represents the investment SMECO makes in utility equipment, poles, transformers, and conductor, as well as employees, vehicles, and facilities: all necessary to carry electricity to your home.

To ensure our customer-members receive reliable service, SMECO has undertaken some major construction projects in the past five years. The Cooperative’s Southern Maryland Reliability Project, which was completed in November 2014 at a cost of $108 million, epitomizes SMECO’s focus on maintaining the highest standard of reliable service for customer-members. The 230-kilovolt loop through our service territory was first envisioned by our former colleagues in the early 1970s, and we expect it to provide enough capacity to see us through the next 50 years.

The other component of the bill, SOS, together with the Power Cost Adjustment, covers the cost of power. That portion of the customer bill has decreased over the past few years, hitting a 10-year low in June 2015. SMECO makes no profit on Standard Offer Service. The wholesale price that SMECO pays for power is passed on to customers without any mark-up. SMECO’s reduced power costs have resulted in savings this summer of more than $28 a month for average-use residential customers compared to last summer. SMECO’s distribution rate filing does not affect the SOS portion, which makes up about 60 percent of the average residential customer bill.

SMECO’s rate filing proposes a Distribution Charge of $0.04367 (4.367 cents) per kilowatt-hour (kWh), about ¾ of a cent per kWh more than the current Distribution Charge of $0.03606 (3.606 cents) per kWh for residential customers. SMECO is also filing to adjust the Facilities Charge, currently $8.60 per month, to $10.75 per month; the Facilities Charge has not changed in more than 20 years.

SMECO’s rate filing also calls for a decrease in the Distribution Charge to $0.0415 (4.15 cents) per kWh in the following year, to offset a step increase to the Facilities Charge to $13.44 per month. The rate structure changes are designed to bill more fixed costs at a fixed rate, rather than a variable rate.

We know customers are sensitive to cost increases, and SMECO works hard to keep rates low. Coupled with SMECO’s efforts to contain costs and purchase low-cost reliable power, customer-members can also manage their electric bill by taking advantage of the variety of energy saving programs we offer.

As a non-profit electric cooperative, revenue from our customers' bills generates the working capital required to continue providing the most reliable service possible. Net margins not required for working capital are passed back to our customer-members in the form of Capital Credits.

SMECO’s goal from the beginning has been to bring our customer-members—our owners—reliable electric service at a reasonable rate. As the infrastructure is replaced and expanded, SMECO continues to focus on providing that reliability.