F.A.Q. - Frequently Asked Questions...


Question 1: Can you help me understand my electric bill? What is the Meter Charge, the Delivery Charge, and the Electric Charge?

 

The Meter Charge is a monthly amount that is fixed. It contributes to the maintenance of various components of the grid such as poles, line, transformers, fuses, cut-outs, and submarine cables. It also supports the administration of the Cooperative (employee salaries, etc. and operation of the office, along with insurance and state fees. . The Meter Charge on Frenchboro is slightly higher than the Meter Charge on Swan’s Island to account for the additional submarine cable necessary to bring power the final step from the mainland to the smaller island.

 

The Delivery Charge is an amount which varies each month depending on the amount of power that you use. The Delivery Charge on Swan’s Island is 12.34 cents per kilowatt-hour (kwh). On Frenchboro, the Delivery Charge is 15.78 cents per kwh – again, slightly higher to account for the additional submarine cable out to Frenchboro. The Delivery Charge is also aimed at supporting the maintenance of the grid components on both islands and attempts to measure the transmission cost of using the grid to move electrons from the mainland to and around both islands based on the amount of power each member uses.

 

The Electric Charge is the cost of the power that the Cooperative has purchased for you from Emera on the mainland. It is a straight “pass-through” charge based on the amount of power you used in the previous month. The Cooperative does not retain any part of the Electric Charge that you pay. Every penny is sent on to Emera to satisfy the cost of your monthly power.

 


Question 2: How is the Electric Charge calculated?

 

Here is how it happens. When the Emera bill arrives at your Co-Op, it includes not just the internet advertised standard-offer price for power, but also something called transmission costs –which is what the Co-Op is charged to move all the previous month’s power across Emera’s grid until it reaches the Co-Op’s meter on Lopus Point on the mainland. Transmission costs can add as much as 2.5 cents per Kwh to the raw power price. The other hidden cost in the Electric Charge is line loss – the kilowatt hours which never reach a member’s meter on Swan’s Island or Frenchboro because it bleeds away from our submarine cables or when tree limbs touch power lines or from an old and inefficient transformer. Typically SIEC experiences 16 % line loss.

As an example, the Emera bill in early March, 2014 showed that we had purchased a total of 205,800 kwh in Feb. at a cost of $25,497 (inclusive of transmission costs). After reading all 569 meters on Frenchboro and Swan’s Island, the power billable to individual users totaled 169,726 kwh. Total line loss amounted to the difference (36,074 kwh) which must be paid for. To arrive at the Electric Charge that appeared on the your March bill, we divide the total cost of all power purchased ($25,497) by the total of billable kwh (169,726) to arrive at the 15.023 cents per kwh on your bill for March.



Question #3: Why does Emera classify the Cooperative as a Medium Commercial customer when almost all the service on both Swan’s Island and Frenchboro is residential?


The Cooperative has completed an informal three-year comparison of residential rates compared with medium commercial rates for power. We determined that the benefit cost-wise for residential rates was minimal – about $10 in savings per year.per member. However, the residential rate stays about the same each month throughout the year, whereas the commercial rate can fluctuate from as low as 6 cents per kwh up to 15 cents per kwh depending on the month of the year. Consequently the Board is inclined to believe that the residential rate offers members a degree of stability that the commercial rate can’t match. We will be approaching Emera in the near future with a request that our classification be changed from commercial to residential.



Question #4: Has the entire $813,000 Federal Work Plan Loan been spent?


No. As of July, 2014, about $538,000 of the $813,000 loan has been spent. Still yet to be done is modernization of the Cooperative’s Switching Station near the Ferry Terminal and replacement of old poles, lines and transformers on Frenchboro. The Switching Station upgrade will get underway near the end of this Summer and the Frenchboro work will commence this Fall and conclude next Spring.



Question #5:  Why wasn't Minturn included in the current work plan?

 

The current four year work plan begun in 2012, is based on an Engineering Study completed in 2011.  The 2011 study prioritized needed/recommended grid updates.  A new Engineering Study planned to be undertaken upon completion of the current work plan in 2015 will enable the SIEC to establish future needs, and define work for other areas of the SIEC Service Area.



Question #6:  Why isn't the SIEC using zero interest loans that are available?


Traditionally the SIEC obtains funds through the US Department of Agriculture (Rural Utility Service). The SIEC is not aware of any zero interest loans available through our lender, the RUS.  The SIEC has applied for grants, when available in the past, and has been successful - but only in emergency situations. As an electric cooperative serving two high energy cost communities, SIEC is eligible to apply for emergency grants when they are available and when we can justify the need in competition with other high energy cost communities nation-wide.

 


Question #7: Why was it necessary to propose a rate increase of 14.5% in 2014?

A number of factors combined to make a rate increase necessary.in 2014. First, the Cooperative’s last rate increase took effect in 2008. Just the inflationary increase since 2008 amounted to 10%. The cost of poles and transformers and the other components of the utility business have gradually increased in price. Likewise, the cost of insurance (casualty and medical) have increased at an even greater rate. At the same time, we have fewer members of the Cooperative than we had in 2008 and we are selling 10% less electricity to our members than we did in 2008. The Delivery Charge is tied directly to power consumption, and when members are using 10% less power than they used to – then the Cooperative’s income is reduced accordingly. An additional factor was the need to modernize our 60 year-old grid. Many of our poles and transformers date from the earliest establishment of the Cooperative in 1949. A Work Plan that replaced these old components had been too long delayed. The safety of the Cooperative’s grid was increasingly being compromised by age and needed to be restored. All of these factors prompted the Cooperative to initiate an independently-conducted Cost of Service Study in the Spring of 2013. This study was concluded in late Summer, 2013 and indicated that the Cooperative required additional revenue to counteract inflation, compensate for reductions in power usage as well as a declining customer base, implement an aggressive right-of-way clearing campaign, and service the Work Plan loan which made possible the grid upgrade.. Further refinements indicated that the additional revenue needed amounted to $107,000 annually and this worked out to a 14.5% rate increase request for 2014.



Question #8: Why did the Maine Public Utilities Commission (MPUC) delay the implementation of the rate increase and agree to review the proposed rate increase to determine if it was reasonable and necessary?


In the event that 10% of a utility’s customers elect to sign a petition objecting to the proposed rate increase, it is the policy of the Maine Public Utilities Commission to delay the implementation of the rate increase until such time as the utility can demonstrate that the proposed increase is reasonable and necessary. Prior to the deadline of the rate increase going into effect (April 4, 2014) 57 members of the Cooperative from Swan’s Island submitted a petition to that effect. This triggered a suspension of the rate increase and a formal review of the rate increase request to be conducted over the next four months.



Question #9: What was the impact of the rate increase suspension and the formal PUC review on the SIEC?   

Large investor-owned utilities in Maine normally budget for the legal costs of defending needed rate increases and actually build into the rate increase itself the cost of recovering lost revenue and legal cost if and when a rate case is finally settled. Their larger staffs are accustomed to these activities. For the SIEC, however – a tiny, member-owned, non-profit utility with no staff (except that necessary to keep the day-to-day operation going,) the impact of a delay in the rate increase for four months along with the unbudgeted legal costs associated with defending the rate request has been significant – both financially and from an operational standpoint. Because a utility must pay for the cost of its own expenses in a rate case defense, the SIEC has no place to turn to for recovering these costs - except its own membership.



Question #10: What happens to the SIEC if it did not attempt to recover the legal costs of the rate case defense and the four months of lost revenue from the delayed rate increase?

The SIEC would fail to make its minimum financial rating of 1.25 for the second year in a row and risk being placed in a probationary status with its lender the RUS (Rural Utility Service), and no longer be deemed credit-worthy. The borrowing ability of the SIEC would be curtailed. This would halt the grid modernization Work Plan, which is presently in progress.