Steamboat Springs Yampa Valley Electric Association has announced its first rate increase in 11 years, but residential customers won't pay more for every kilowatt hour of electricity they use to heat water and refrigerate perishable food. Instead, they'll pay an additional $2.40 a month, bringing their monthly service charge up from $3.10 to $5.50.
YVEA President and General Manager Larry Covillo said Tuesday when applied across the board to all categories of its customers in northwest Colorado, the flat rate increase will raise an additional $1 million for YVEA. It will help the electrical cooperative with the increasing costs of maintenance and expansion of facilities, he said.
"We've come to the end of the rope in terms of controlling our costs," Covillo said. "We need a lot of infrastructure."
Covillo said that in the past two years, the association has added $8.3 million in plant improvements. It also upgraded substations and replaced aging underground cables in Craig, Hayden, Steamboat Springs and the south Routt community. YVEA serves 21,300 customers, including a handful in extreme southern Wyoming.
YVEA board member Irlan Neas said the increasing need to replace defective underground cables in Steamboat Springs' residential neighborhoods is a significant part of the increase in the service charge.
"It's a good thing I like the underground cables, but we're having more repair on that than we used to."
The increase for residential customers represents a 77 percent jump in the service charge alone and 80 percent for commercial users.
But Covillo said when regarded as a percentage of the overall electric bill, the increase is much more modest, a little more than 1 percent if a consumer uses $200 of electricity in addition to the service charge.
YVEA is a nonprofit cooperative whose customers are members of the association.
Any profit margin is allocated to the members.
"We did not increase rates to increase the bottom line," Covillo said. "The bottom line is going to remain the same. Our profit is all returned to the customer. The growth Steamboat is experiencing helps in some ways" by creating new customers for the cooperative, but it needs more revenue stream to meet the infrastructure needs of the growing community, he said.
Covillo said at first look, it might appear that someone who uses very little electricity will be subsidizing the increase for large residential users through the flat rate. However, Covillo said the real story is that the heavy users are subsidizing the light users through their kilowatt hour rates.
Currently, residential customers pay 6.6385 cents per kilowatt hour and YVEA commercial customers pay 6.7822 cents per kilowatt hour.
Even at the newly increased rates, the service charges don't cover the cost of electrical equipment, Covillo said.
"We have $2,500 invested in equipment for every consumer," Covillo said. "We have to collect enough to pay for that equipment. But based on interest rates of 6 percent, we'd have to charge $16 a month (in service charges) just to cover the carrying cost of the equipment."
Instead, the amount YVEA charges per kilowatt hour subsidizes the cost of equipment at the electrical cooperative for all of its customers.
YVEA mailed checks representing the return of profits to its members last June. The checks varied in size depending upon the individual's or company's electrical use. However, in many years, Covillo said, the association's board of directors has decided to allocate profits to its members and issue statements but not write the refund checks. Instead, the money is held back for infrastructure needs.
"That allows us to get around borrowing money and paying interest on it," Covillo said.
When that happens, Covillo said, cooperative members are in essence building equity in the association. When possible, that "equity" is returned to YVEA members in the form of capital credit disbursements in the spring.
YVEA's 2001 budget projects revenues of $33,378,591 against overall expenses of $29,556,710. Of the projected expense, $18.3 million is attributable to the purchase of wholesale electricity, Covillo said.
YVEA has begun to engineer system improvements to meet the requirements of growth in the Steamboat area. Growth represents new customers to YVEA but also represents new costs, Neas pointed out.
"At some of our substations, we need to get more electricity in to them," Neas said. "The growth in customers is one of the reasons we've been able to avoid rate increases for the last 11 years. In some of the areas of the state that aren't experiencing growth, electricity rates go up every year. We still have one of the lowest rates of all the power co-ops in the state."