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Rate Increase Necessary in 2018

Cape Hatteras Electric Cooperative recently concluded a cost of service study, which was conducted to ensure that electricity rates are sufficient to recover the cooperative’s power costs and operating expenses for both residential and commercial members.  CHEC’s rate consultant, along with management, reviewed the results of the study and presented the findings to the cooperative Board of Directors in November. 

With expected increases in the cost of purchased power and system improvements, including the upcoming replacement of our transmission cable on the new Bonner Bridge, the study revealed that it is necessary to implement an average 13.72% rate increase beginning in May 2018.  Of this amount, 7.2% of the increase is the result of projected wholesale power cost increases.  The remaining 6.52% can be attributed to operations and administrative expenses, as well as the increase in depreciation and interest expense associated with nearly $20 million in capital investments over the next three years. CHEC has held rates at their current level since 2009. 

In terms of dollar amounts, a residential account that has a monthly bill of $120 will see an increase of $21, bringing the bill to $141. Included, is a small increase in the basic monthly service charge, which helps the cooperative cover the cost of building and maintaining the distribution system and delivering power.  The residential and commercial monthly service charges will each increase by $5.00 to equal $25.00 and $30.00 respectively.

A full list of the new rate schedule is available at here.

As always, CHEC management and staff will continue to work diligently to manage costs, to keep rates stable, for as long as possible.  However, the fact remains that the cost of power continues to rise, as does the cost of equipment necessary to keep your electrical system operating safely and reliably. Based on current projections, CHEC anticipates having to implement another rate increase in three to four years. 

Thank you in advance for your understanding as cooperative staff and your Board of Directors work to implement policies and rates that are equitable, and in the best interest of all CHEC members.

Click here to view our 'Frequently Asked Questions' about the increase.

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November 2017:

CHEC Conducting Cost of Service Study

    It has been almost ten years since Cape Hatteras Electric Cooperative has had a cost of service study conducted, and we have been fortunate to have held rates at their current level since 2009.  With system improvements, increases in the cost of purchased power, which represents approximately 60% of the cooperative’s expense, and the upcoming replacement of our transmission cable on the new Bonner Bridge, it has come time to perform a cost of service study.  A cost of service study is an in-depth analysis of revenues, expenses and future cost projections to determine how much revenue will be needed to meet the financial obligations of the cooperative.

     During a cost of service study, rates are examined and recommendations for changes are made concerning the base charge, rate structures and the cost per kWh.  In most cases a cost of service study is performed more often than ten-year increments, but low commodity prices and closely managed costs have enabled CHEC to offer members stable rates for nearly a decade.  Recently, North Carolina electric distribution systems have seen projections of increasing purchase power costs, primarily driven by Duke Energy coal ash settlements, and CHEC is no exception.  However, CHEC has some additional financial pressures.  Here on Hatteras Island, facilities are subjected to extreme coastal conditions, rapidly deteriorating the electric infrastructure and causing increased maintenance and depreciation expense.  In addition, the new Bonner bridge will require the cooperative to install new transmission cables, to serve Hatteras and Ocracoke Islands. We have estimated that this will cost approximately $10 million. At press time, the cost to install the hanger and conduit system on the new bridge had not been finalized by NCDOT. Finally, all of the costs associated with these required capital improvements will not produce any additional revenue to recoup those costs.  These are all factors that will be considered in this much needed study.

     In every cost of service study difficult decisions must be made to equitably distribute the revenue requirements over the various rates and their components.  For example, options such as a change in the per kWh rate or an increase in the base charge, could be used to meet future revenue requirements. Objectivity is the key to producing an accurate cost of service study.  For that reason, CHEC has contracted with Booth and Associates, a consulting group, to take our financial information and cost projections and present the cooperative with recommendations for our future rates.  We anticipate the study to be completed in the late fall of this year.

     At CHEC, we are proud to have provided members with dependable electric service at nearly constant rates for the last ten years.  We will continue to look for cost saving measures to minimize the impact of rate changes to our members in the future.

 

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