Residential customers of Kit Carson Electric Cooperative will likely see higher rates starting next month.
State regulators approved an increase Dec. 7 that will raise the average household power bill or about $9.82 a month. The average home served by Kit Carson uses about 450 kilowatt-hours of electricity every month.
Under the new rates, the flat monthly fee will go from $14.50 a month to $20.50 a month for residential customers. The cost of power will also increase slightly.
The increase comes after more than a year of debate between the co-op and members who protested the rate hike.
The co-op announced its intention of raising rates last fall, and enough co-op members objected that state regulators stepped in and investigated whether the proposed increase was “just and reasonable.”
The five-member Public Regulation Commission (PRC) voted 3-2 in favor of the new rates during a hearing Dec. 7.
The new rates are less than what the co-op had originally requested, but co-op CEO Luis Reyes said they should be enough to keep the co-op solvent for the next few years.
“I think we can live with this,” said Reyes in an interview Dec. 14.
Last year, the co-op lost nearly $900,000. Through 11 months this year, the co-op has positive margins of about $200,000, with some costs still unaccounted for, Reyes said.
Higher rates for commercial and other non-residential customers already went into effect because those rates were not protested.
Opponents of the rate hike maintain that the increase took into account costs that were unrelated to the electric utility and instead were tied to subsidiary propane and telecom businesses. The co-op says those claims are unfounded.
Utilities measure their financial performance through various metrics, one of which is the Operating Times Interest Earned Ratio, or OTIER. It’s compares the co-op’s annual operating margins to its interest expense. It’s one way to gauge whether the co-op is making enough revenue to cover its debts. The co-op’s federal lenders require a minimum OTIER of 1.10.
The co-op asked for a rate increase based on its 2014 financial figures. That year, the co-op reported revenues of nearly $39 million and an OTIER of 1.24. It was asking for new rates that would generate an OTIER of 1.9, or $3.7 million in additional revenue a year.
Economists for the PRC determined that the co-op should get only enough additional revenue to hit a OTIER of 1.5. By their calculations, that would be around $1.8 million in annual revenue.
The rates approved last week would give the co-op an OTIER of 1.64 — or $2 million in new revenue from residential customers each year.
Much of the back-and-forth between the co-op, PRC staff and members fighting the increase had to do with determining costs that were associated with the co-op’s propane and telecom subsidiaries rather than the electric utility.
Staff for the PRC were clear that regulators only had jurisdiction over rates that were sufficient to keep the electric utility afloat. In written testimony, staff said they had identified about $280,000 in expenses that they felt were not tied to the utility.
Link Summers, a co-op member who fight the rate hike, told The Taos News the final decision did not fully exclude theses costs. He also noted that Kit Carson should expect to see power sales increase once a water treatment plant at the Questa mine comes fully online. With those sales, he said the co-op will make up some of the losses it incurred when the mine closed in 2014, and the rates approved last week will be more than the co-op needs to get by.
Valerie Espinoza, who represents Taos on the commission, also told The Taos News she did not believe the co-op had proved it needed any increase at all. Espinoza was one of two commissioners to vote against the increase.
“I wanted to be sure there were not costs that were tied outside electricity to this, and I wasn’t convinced 100 percent that some of those costs were added on,” Espinoza said.
The rates that were approved by regulators were actually about 10 percent higher than those spelled out in a preliminary settlement that the co-op and PRC staff had negotiated back in July. That “stipulation” was thrown out because the hearing examiner in charge of the case determined it was not legal.