In an effort to increase competition among electric utilities, many states passed legislation back in the late 1990s that allowed customers to have a choice of providers when it came to purchasing electricity.  In June’s Manager’s Report, I wrote about how this deregulation had the opposite effect and competition was stifled.  To follow up, a recent article published in the USA Today newspaper describes some of the horror stories customers have experienced regarding their electric bills since rate caps were lifted in many states.

The article sites a particular case of a couple living in a three bedroom house in Illinois who saw their monthly electric bills soar to $538 per month on average.  In the state of Texas, bills increased an average of 58%, while in Connecticut and Massachusetts customer bills rose over 50% compared to just four years ago.  Many of these states, such as Virginia and Ohio, are re-regulating their power suppliers to keep prices at a level their residents can afford. 

Several factors are accountable for these dramatic increases in the price of electricity.  First, there is little if any competition in the wholesale electricity market.  Secondly, supplies of electricity are limited as wholesale generation companies have built very few base generation plants or transmission lines used to move bulk power.  Since these companies were no longer guaranteed a return on their investment, they could not afford to take such chances nor could they borrow the money needed for construction.  Furthermore, if the supplies were limited, they could charge more for their product. 

There is also the issue with the high cost of fuels used to generate electricity.  Coal prices are up over 70% while the price of natural gas has tripled.  These increases have driven rates up in both regulated and deregulated states.  The average price increase since 2002 in states with regulated utilities is 21% while the states which deregulated have seen an average increase of over 36%.

It’s no secret that across the nation within the past four years the cost of fuel and fuel related commodities such as electricity has risen to record levels.  Even in North Carolina, which is a regulated state, the cost of electricity on average has increased 11.3%.  As you have obviously seen, your cooperative is not immune to the large increases in wholesale power costs either.  From 2003 up to July 2007, wholesale power costs to French Broad EMC have increased 15.6%.  During this same time frame, retail rates to our customers have risen 6.4%. 

Although we cannot control wholesale power or fuel costs, we are certainly thankful that the increases we have seen here are much less than what others are experiencing in deregulated markets or even in other parts of our state. 
Thank You,
Jeff Loven
Email: jeff.loven@frenchbroademc.com


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