An educational series from East-Central Iowa REC
Topic 1: An introduction to electric rate building
ECI REC takes into account many different factors when creating a rate structure that is fair and reasonable, as required under Iowa law. We must cover the cost of providing electricity, including facility costs, maintenance, and more, in order to continue to provide our members with reliable electricity.
Rate classes and sub-categories within each class are used to determine a rate category based on similar patterns of electric consumption. Secondly, different cost categories may apply to your account, depending on your level of service.
It is a complex process to analyze operating expenses and capital expenditures, and then determine how to cover them with our rates classes and cost categories. For major rate changes, the Cooperative hires a consultant to conduct a cost of service study. The study assigns costs by rate class and cost category and determines how much revenue the Cooperative needs to minimize service interruptions.
Our goal in defining a rate structure is to generate sufficient revenue and reflect the cost of providing service, while keeping it as simple as possible for our members. Every time we change rates, we strive not to alter radically from previous rates. More recently, rates are also expected to promote the efficient use of energy.
Sometimes external forces, such as new technology, can cause us to reevaluate the current rate structure. That is happening today—not only to East-Central Iowa REC, but to all electric utilities. Later in this series, we will further explore how technology changes may influence the way our current rate structure functions, as well as provide more information about how we determine your rate class and what makes up our cost categories.