Print
Comment
Rate
CEO explains costs related to SSVEC rate increase
 |
| Rey Martinez III, an SSVEC employee, and his sons R.J., 7, and Ryan, 1, all of Willcox, check out a company truck prior to the annual meeting Thursday. (Ainslee Wittig/ARN) |
By Ainslee S. Wittig/Arizona Range News
The CEO of Sulphur Springs Valley Electric Cooperative spoke about increasing global costs, power costs, SSVEC costs, and the cooperative's pending rate case at its 71st annual meeting, held in Willcox Thursday.
Chief Executive Officer Creden Huber offered insight on how the global economy affects us directly.
"In today's world we are truly a global economy where the market demands in one part of the world affects another. China has 1.3 billion people with 100 cities exceeding 1 million people. China's economy grows at an average annual rate of 10 percent. In 2006 and 2007 China's internal growth consumed 1/2 the world's concrete, 1/3 the world's steel, 1/4 the world's copper and 1/5 the world's oil. The world's largest hydro project, China's Three Gorges Dam on the Yangtze River, will have a generation capacity of 22,500 megawatts, when completed in 2011. Compare that to Hoover Dam with a capacity of 2,080 MWs. This construction project alone is a huge drain on available steel and credited with raising finished steel prices 30 to 40 percent," Huber said.
"In China, a new coal-fired plant, with little or no environmental controls and large enough to serve the area of San Diego, is built every 7 to 10 days. China has plans to build 500 plants by 2015. India, with 1.1 billion people, will add 200 coal-fired plants in 7 years."
How does this affect the cost of power at SSVEC?
Huber said the largest portion of the cooperative's costs and members' bills are for buying power. The power costs are passed on directly to members with no mark-up or margin for SSVEC.
"What does China's growth and thirst for concrete, steel, copper and electric equipment mean to the United States? From 2004 to 2007 non-renewable generation, transmission and distribution equipment rose 25 to 35 percent in price compared to the general inflation rate of 8 percent. Baseload coal plants' building costs went up 27 percent in 2007, rose 76 percent since 2005, and 130 percent since 2000," he said.
In 2008, SSVEC power purchases exceeded 68 million dollars and accounted for 65 percent of total revenues. Compare this to 2007, where SSVEC power purchases totaled 58 million dollars and represented only 63 percent of total revenues, Huber said.
AEPCO provides most of the cooperative's power and it has increased its rate to SSVEC every year since 2005 due to a rate increase and increased costs for fuel to produce power, Huber said.
"We anticipate that the cost of power from AEPCO will continue to increase as the recently negotiated coal and rail transportation costs for AEPCO increased these prices by 85 percent," he added.
While SSVEC is still obligated to purchase a specified amount of power from AEPCO, in 2008, SSVEC became a partial requirements member of AEPCO and is now able to request bids for power above and beyond this amount from other power generators, he told the members.
"Higher material costs and higher power costs are a double whammy for SSVEC. Growth is driving our plant additions and power costs," he said. "In Arizona we are a summer peaking system, which is no surprise. We had our highest peak, over 191 megawatts, last summer, which was almost double our 1998 peak and our summer peak will continue to grow."
On June 30, 2008, SSVEC filed an application with the Arizona Corporation Commission for a rate increase. The last rate increase from SSVEC was based on 1991 costs and went into effect in 1993.
"In the 16 years since our last rate increase, our costs have increased significantly, particularly in the last few years," Huber said. "On average, the rate increase requested is 11.75 percent. This may change based on what the ACC approves and it will vary by each of the SSVEC rate classes depending on usage. SSVEC hired an independent outside contractor to conduct this cost of service study. Our intent is for each customer class, such as residential, agriculture, and large and small businesses to pay their own way and not to have one group subsidize another."
He added, "We expect the new rates to go into effect this fall. We estimate we will spend $400,000 on the rate case and that does not include our staff time."
Construction work in progress was $1.5 million in 1991 and has risen to almost $18 million in 2007, he said. This is a reflection of increased material prices and increased workload.
"Our total utility plant increased almost $155 million (from $76 million to $230 million) and our long term debt increased to almost $98 million (from $50 million in 1991)," he said.
SSVEC is spending its revenue on "purchased power and electric plants," Huber said.
SSVEC's work plan for 2008-2009 is more than $72 million, funded through a loan package of $70,780,000 approved by the Arizona Corporation Commission and the Rural Utilities Cooperative Finance Corporation, SSVEC's banker.
The work plan includes:
$5,355,000 for new members
$3,745,000 for new feeders and distribution lines
$7,740,000 to upgrade existing lines
$6,400,000 for new substations
$14,775,000 for transformers, meters and electronic line eq.
$6,590,000 for Automatic meter reading, ROWS, and SL etc.
$20,080,000 for transmission lines and
$6,195,000 for Other Projects
Projects for new member growth that are not needed if the economy continues to slow will be delayed until they are necessary, he added.
Huber said SSVEC has also looked at ways to increase non-electric revenues, which in turn reduce the amount needed to collect from members to pay for power.
Some of these additional revenue sources include:
The contract with Fort Huachuca
Partnership with TransWorld Network or TWN on a high-speed wireless internet and phone business
Joint use contracts in which other utilities pay SSVEC to attach their equipment to our poles
And a program to sell salvage materials rather than paying a company to dispose of them.
"In 2008, these measures added about $3.2 million dollars to our bottom line. These revenues have reduced the amount of the rate increase," he said.
Huber said the cooperative has applied for stimulus money for renewables, smart grid, transmission renovations, and substations. "We are also looking at stimulus money for energy efficiency and other available monies. We don't have great expectations for Stimulus Funds, but if we do receive any funds it will help offset the costs of these projects," he said.
"I don't want you to think that we are just here to sell energy and don't care what it costs you," he said.
Huber told members about Energy Management Specialists who help you lower your electric bill and use electricity in the most efficient way possible to keep your bill as low as possible.
He also told about a loan program for more efficient HVAC equipment; rebate programs for higher efficiency; and the Touchstone Energy Efficient Home program to help build a home that uses the least energy possible.
Chief Executive Officer Creden Huber offered insight on how the global economy affects us directly.
"In today's world we are truly a global economy where the market demands in one part of the world affects another. China has 1.3 billion people with 100 cities exceeding 1 million people. China's economy grows at an average annual rate of 10 percent. In 2006 and 2007 China's internal growth consumed 1/2 the world's concrete, 1/3 the world's steel, 1/4 the world's copper and 1/5 the world's oil. The world's largest hydro project, China's Three Gorges Dam on the Yangtze River, will have a generation capacity of 22,500 megawatts, when completed in 2011. Compare that to Hoover Dam with a capacity of 2,080 MWs. This construction project alone is a huge drain on available steel and credited with raising finished steel prices 30 to 40 percent," Huber said.
"In China, a new coal-fired plant, with little or no environmental controls and large enough to serve the area of San Diego, is built every 7 to 10 days. China has plans to build 500 plants by 2015. India, with 1.1 billion people, will add 200 coal-fired plants in 7 years."
How does this affect the cost of power at SSVEC?
Huber said the largest portion of the cooperative's costs and members' bills are for buying power. The power costs are passed on directly to members with no mark-up or margin for SSVEC.
"What does China's growth and thirst for concrete, steel, copper and electric equipment mean to the United States? From 2004 to 2007 non-renewable generation, transmission and distribution equipment rose 25 to 35 percent in price compared to the general inflation rate of 8 percent. Baseload coal plants' building costs went up 27 percent in 2007, rose 76 percent since 2005, and 130 percent since 2000," he said.
In 2008, SSVEC power purchases exceeded 68 million dollars and accounted for 65 percent of total revenues. Compare this to 2007, where SSVEC power purchases totaled 58 million dollars and represented only 63 percent of total revenues, Huber said.
AEPCO provides most of the cooperative's power and it has increased its rate to SSVEC every year since 2005 due to a rate increase and increased costs for fuel to produce power, Huber said.
"We anticipate that the cost of power from AEPCO will continue to increase as the recently negotiated coal and rail transportation costs for AEPCO increased these prices by 85 percent," he added.
While SSVEC is still obligated to purchase a specified amount of power from AEPCO, in 2008, SSVEC became a partial requirements member of AEPCO and is now able to request bids for power above and beyond this amount from other power generators, he told the members.
"Higher material costs and higher power costs are a double whammy for SSVEC. Growth is driving our plant additions and power costs," he said. "In Arizona we are a summer peaking system, which is no surprise. We had our highest peak, over 191 megawatts, last summer, which was almost double our 1998 peak and our summer peak will continue to grow."
On June 30, 2008, SSVEC filed an application with the Arizona Corporation Commission for a rate increase. The last rate increase from SSVEC was based on 1991 costs and went into effect in 1993.
"In the 16 years since our last rate increase, our costs have increased significantly, particularly in the last few years," Huber said. "On average, the rate increase requested is 11.75 percent. This may change based on what the ACC approves and it will vary by each of the SSVEC rate classes depending on usage. SSVEC hired an independent outside contractor to conduct this cost of service study. Our intent is for each customer class, such as residential, agriculture, and large and small businesses to pay their own way and not to have one group subsidize another."
He added, "We expect the new rates to go into effect this fall. We estimate we will spend $400,000 on the rate case and that does not include our staff time."
Construction work in progress was $1.5 million in 1991 and has risen to almost $18 million in 2007, he said. This is a reflection of increased material prices and increased workload.
"Our total utility plant increased almost $155 million (from $76 million to $230 million) and our long term debt increased to almost $98 million (from $50 million in 1991)," he said.
SSVEC is spending its revenue on "purchased power and electric plants," Huber said.
SSVEC's work plan for 2008-2009 is more than $72 million, funded through a loan package of $70,780,000 approved by the Arizona Corporation Commission and the Rural Utilities Cooperative Finance Corporation, SSVEC's banker.
The work plan includes:
$5,355,000 for new members
$3,745,000 for new feeders and distribution lines
$7,740,000 to upgrade existing lines
$6,400,000 for new substations
$14,775,000 for transformers, meters and electronic line eq.
$6,590,000 for Automatic meter reading, ROWS, and SL etc.
$20,080,000 for transmission lines and
$6,195,000 for Other Projects
Projects for new member growth that are not needed if the economy continues to slow will be delayed until they are necessary, he added.
Huber said SSVEC has also looked at ways to increase non-electric revenues, which in turn reduce the amount needed to collect from members to pay for power.
Some of these additional revenue sources include:
"In 2008, these measures added about $3.2 million dollars to our bottom line. These revenues have reduced the amount of the rate increase," he said.
Huber said the cooperative has applied for stimulus money for renewables, smart grid, transmission renovations, and substations. "We are also looking at stimulus money for energy efficiency and other available monies. We don't have great expectations for Stimulus Funds, but if we do receive any funds it will help offset the costs of these projects," he said.
"I don't want you to think that we are just here to sell energy and don't care what it costs you," he said.
Huber told members about Energy Management Specialists who help you lower your electric bill and use electricity in the most efficient way possible to keep your bill as low as possible.
He also told about a loan program for more efficient HVAC equipment; rebate programs for higher efficiency; and the Touchstone Energy Efficient Home program to help build a home that uses the least energy possible.
 |
 |
|
| NCCH is prepared for swine flu | Man killed in St. David standoff identified |
Article Rating
Reader Comments
The following are comments from the readers. In no way do they represent the view of willcoxrangenews.com.
