By Matt Berry, CEO
Two of the most common questions we get are:
1. Why do I have to pay a flat monthly Service Availability charge even when I'm not there using power?
2.Why is it $35 per month? (Soon to be $45 starting with our September rate increase).
Regardless of how much electricity a particular family uses, the base cost of making service available to each house is roughly the same. That is why every member pays the Service Availability charge each month to cover basic operational, reliability, and outage repair costs.
There are four basic components to our monthly residential bill:
- the kilowatt hour (kWh) energy charge
- the Ohio kWh electricity tax
- the flat monthly Service Availability charge
- the power Cost Adjustment, which reflects part of the cost of power generation and high voltage transmission
Your monthly investment ensures you have access to safe, reliable and affordable power 24/7 when you need it.
The Service Availability charge pays for non-stop investing in your power reliability. We need to constantly invest in the maintenance and upgrade of our electric system, usually $3-4 million per year. We all need a reliable local energy grid, so we all share in the costs of maintaining and upgrading it. 
The Service Availability charge also helps us pay for outage repairs to restore your power after an outage. It helps ensure you’ll have power when you need it.
This charge is a monthly investment that helps your co-op cover the expenses of maintaining our electric system. Combating cyber security threats and maintaining poles, wires, and substations takes strategic planning and significant resources. This flat charge ensures that equipment operates properly and staff is trained and ready so the lights turn on when you need them.
Fixed vs. variable costs
There are two types of costs that we have to pay to run our business: fixed costs and variable costs. For our business, fixed costs are those that don’t fluctuate based on the amount of electricity we sell. Whether we sell 1 kWh or 1 million kWh, we have the fixed costs of building and maintaining everything from the substation to your meter. Those fixed costs include poles, wires, transformers, re-closers, voltage regulators, meters, property taxes, substations, depreciation expense, interest expense, vehicles, billing system, mapping and outage management system, pole testing, tree trimming, line maintenance, and more.
To have electric rates that are as fair as possible to all customer classes, our philosophy is that fixed costs should be paid for with a fixed charge.
This means that even if you use 0 kWh for a month, you will have a $35 bill. This has been our charge since August 2010 and is increasing $10 starting in September, to $45 per month.
Let's do the math
If we lowered our Service Availability charge, the costs don’t magically disappear. Let’s say we lowered it to a grand total of just $5 per month, a $40 reduction from the new rates ($45 – $40 = $5). That $40 monthly cost didn’t go away; it still exists to us and still has to be paid. So we would have to move it to your variable kilowatt-hour (kWh) energy charge. This will be $0.1004 per kWh with the new rates. So instead of $0.1004, it might have to be something like $0.15 per kWh, for example. That means people who use more electricity would end up paying more than it costs the cooperative to make service available. People who use less electricity will end up being subsidized.
Low-income members usually cannot afford energy efficiency upgrades such as extra insulation, heat pumps, and high-efficiency appliances. Therefore, across the electric industry, lower income consumers typically use more electricity; their homes are not efficient. If we made our monthly Service Availability charge lower than what it actually costs us to make service available, this could hurt low-income consumers. Higher users – including low income – would be paying more of our fixed costs in our variable kWh energy charge.
I hope this explanation makes sense. Please contact me with your questions or concerns by phone at 1-800-962-3830 or by email at mberry@midwestrec.com.