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June06 Ranch Rio Grande Electric Co-op August, 2008
1
Rio Grande Electric Cooperative, Inc.
August, 2008
Up Date
You may be still reeling from your June electric bill and probably are holding your July bill
tightly gripped in a clenched fist as numerous curse words leap to mind.
If you are, I can
sympathizethat is exactly how I felt when I received our wholesale power bill from our supplier. In case you
did not know it, we pass on wholesale power costs to our members at exactly the same price we buy it for. There
are no margins added to the cost of wholesale power, only the purchase and delivery of wholesale power.
There are two things different about this bill and previous bills this year. First, Rio Grande sold a record number
of kWhs, especially in the residential sector. Secondly, the PCA (Power Cost Adjustment) factor went to 6.5 cents per kWh. Unfortunately, the
two came together to make your June bill probably one of the highest you have ever paid. No amount of explanation is going to make paying
a high bill palatable, but I want you to know the facts.
The fact that you bought more kWhs in June is the result of the weather we are experiencing. We have had a very hot, dry summer thus far. As
a result, your electric bill is showing the effect. Even if the PCA factor had not gone up, your June bill would have been high simply because you
used more. This is the one component you have control over, the one component you can do something about. You can conserve. Turn off
unnecessary lights, set your thermostat to 80 degrees, insulate and weatherize your home, and in general use less. None of us like to be
inconvenienced, but these measures will reduce your electric bill.
The PCA factor is, unfortunately, out of your controland at this point, it is out of my control. Market forces are wreaking havoc with the price
of wholesale electric energy. Elements of these market forces have pushed the balancing energy prices to record highs. The board of directors,
in an effort to minimize the impact on our members, allowed RGEC to absorb some $1.8 million in wholesale power costs. This is money that will
have to be collected, but will be spread out over time, so that you dont feel the full brunt of the cost.
The first problem in the market is exponentially higher congestion costs. Congestion costs result when too many kWhs are trying to be pushed
down too small a conductor. It will help if you think of the transmission grid, which carries bulk energy to various corners of the state, as an
interstate highway. Most interstate highways have two lanes in each direction. No matter how hard you try, only a certain number of vehicles
can travel those lanes at one time. Congestion on the highway results when you try to move too many vehicles at once. The same is true with
the transmission grid. Too many kWhs going down the line at once causes congestion. Dealing with congestion raises prices.
So you might ask, What is causing the congestion all of the sudden? The answer is wind generation. Wind generation has come on line so
rapidly that the transmission grid (interstate highway system) has not kept pace. As a result, there is congestion that must be managed by the
market, and that management causes costs to go up. The State of Texas now has more wind generation than any other state in the union. In fact,
our wind generation is now more than double that of the next closest state, California.
You might say, Dan, I understand your explanation, but I still dont like it. Well my friend, youre preaching to the choirI dont like it either.
I wish congestion cost what it cost last yearless than a dollar per mega-watt-hour, instead of $35, which is what it was in June. Please be
assured that the board of directors and the employees here at the Cooperative are doing everything possible to mitigate the impact of what is
happening in the market place. We are all in this together; we are all paying the same amount for electric energy, so dont hesitate to call and ask
follow up questions or express concerns.
We have done a good job of holding the cost of energy as low as possible. You have experienced only two rate increases in the last 23 years.
The two added together were less than ten percent. Nothing you buy has gone up that little during the same period. I am proud of this fact
because it clearly demonstrates our commitment to keep costs as low as possible. We are all going to go through a rocky time, but we will come
through this and things will return to normal. I appreciate your patience with us as we make the necessary adjustments.
A Message From The
General Manager/CEO
By Dan Laws Rio Grande Electric Co-op August, 2008
2
June PCA Rises With Fuel Prices, Market Impact
For comparison, the graph immediately above lists the Consumer Price Index
May National Average percentage increase in price over the past ten years, as well
as Rio Grandes June, 1998 to June 2008 regular residential rate including PCA,
and Availability Charge.
OFFICIAL NOTICE
Rio Grande Electric Cooperative 63rd Annual Meeting
Saturday, October 11, 2008
Fort Stockton Middle School
2400 W. 5th Street, Fort Stockton, TX
Registration begins at 8:00 a.m.
Business Meeting begins promptly at 10:00 a.m.
YOU MUST BE PRESENT AND REGISTERED BEFORE 10:00 A.M.
TO ENSURE ELIGIBILITY FOR ALL DOOR PRIZES!
Free Continental Breakfast
Free Barbecue Lunch
Door Prizes (min. value $100 ea.)
Free Attendance Prize To Each Membership
Entertainment: Stage Magician of the Year Dana Daniels
Kids Korral Activities
GRAND PRIZE: RETIRED CO-OP FORD CLUB WAGON (Van)!
Watch for your
RESERVATION FORM
in the mail next month
Return it to be eligible for
a Special Prize Drawing!
May 10 Yr. CPI &
June 10 Yr. RGEC
Price
While this is a large increase over the previous months
PCA, it is much less than the percentage of increase in
many of todays prices. The chart uses May Consumer
Price Index figures, which were the most current available,
for a ten-year comparison of product pricing. No doubt,
when June CPI figures become available, they will indicate
the sharp rises in gasoline, and other fuel prices, as well as
the across the board increases in grocery prices due to
transportation increases. You will recall that gasoline,
diesel, and other fuel prices spiked in June.
Rio Grande held the line on raising the PCA for as long as
possible, in fact, expending about $1.8 million in power
costs which were not passed along to the membership.
However, expect the PCA to remain at or near the current
level throughout the rest of 2008, in an effort to keep pace
with costs and recoup what was expended from reserve
funds. When fuel costs return to lower levels, the PCA will
be reflective of that. RGECs PCA rises and falls, depending on the actual price of fuel. For-profit electric utilities in Texas are increasing their
rates at breakneck speed, and while not impossible, it is highly improbable that those rates will ever be lowered if or when fuel prices decline.
Electric power provided by Rio Grande still remains a good value -- especially in todays hostile economy. Based on 1000 kWh per month,
factoring in the Availability Charge, PCA, and Base Rate for Regular Residential, RGECs price per kWh is .17901, in contrast to the most
popular for-profit retail provider in the area, whose current price is .1840.
In order to reflect the true cost of fuels necessary to
generate power, last month, regretably, RGEC was forced to
raise the Power Cost Adjustment to .0650 cents per kilowatt
hour.
See Director Candidates
List, page 7 Rio Grande Electric Co-op August, 2008
3
During the first six months of 2008,
RGEC spent lots of manpower
and resources replacing poles
lost to wildfires, according to
Director of Operations Clinton
Brown. Just five of these
wildfires claimed a total of
ninety-one poles, with one fire
alone accounting for 43 poles in
a 50 square mile area destroyed.
The cost to repair the damage to
RGECs equipment from this fire
alone was estimated to be over
$95,000.
Brown said, Normally, when we
think of weather-related problems
affecting RGEC electric service,
we think of problems associated
with rain storms, but the biggest
weather-related problems we
have had so far this year have
been due to the lack of rain.
During the past few months,
there have been numerous fire
warning alerts due to high winds
and extremely low humidity. The
high winds and lack of precipita-
tion have dried grass and other
vegetation across the state, posing
significant fire danger.
Brackettville Operations Area Linemen repair damage caused by the fire near Kickapoo Caverns
State Park. Photo by RGEC Linemen
There is hardly a portion of RGECs territory that has been spared fromsome sort of fire-related loss this year, though some areas have been
harder hit than others. For example, the Brackettville Operations Area was impacted by a wildfire centralized ne