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2017 Rate Change

In our society, we often strive to be above average, but where our electric bill is concerned, most of us prefer to be below average. To maintain the quality, reliability and stability of the services we provide, it is necessary for us to adjust our pricing structure.

Please know, the consideration of changing rates is not easy for the board of trustees and management at Victory Electric. We understand our members do not want to pay more each month on their electric bill, but we also have a responsibility to our members of keeping the cooperative in a solid financial position to meet financial and loan obligations and keep up with rising costs, inflation and other external pressures.

We invest in technology to improve reliability, operations and efficiency. We also live by the cooperative difference - as a cooperative, we are not driven by profits and making a return for shareholders. Rather, we are service-driven and operate as close to cost as possible. Our focus is on keeping the business financially strong on behalf of all members, in order to continue to provide safe, reliable service at the lowest practical cost.

For a printable version of this information, it can be downloaded here. Espanol.

 

Frequently Asked Questions About the
Proposed 2017 Victory Electric Rate Change

 

How much is the rate change and when does it go into effect?
Victory Electric is PROPOSING an overall average 6.7 percent increase to go into effect April 1, 2017. 

Because Victory Electric is a cooperative, our members are also owners of the cooperative and have a voice in decisions made by their elected trustees. We invite our members to attend a public listening meeting to ask questions and learn more about the proposed rate change and talk to co-op trustees. These meetings will be held on Wednesday, January 25, and Wednesday, February 15, at 5:30 at Victory Electric.

A special board meeting will be held at Victory Electric on Friday, March 24, at 9 a.m., where the board will discuss and vote on the rate change proposal. If the proposal passes, the rate change will go into effect April 1, 2017, and will be reflected starting on May 2017 electric bills.

We hope the advanced notification will give you time to prepare and adjust your monthly budgets.

 

When was the last rate increase?
To maintain the quality, reliability and stability of the services we provide, it is necessary for us to adjust our pricing structure. While virtually all aspects of today’s cost of living continue to rise, we pride ourselves on avoiding routine price adjustments. Members haven’t seen a rate increase for six and seven years, respectively. The last time rates changed was in 2010 for our MKEC system and 2011 for our rural legacy system. In a world of rising costs for nearly all consumer products, six to seven years is quite an accomplishment.

 

What is the difference between MKEC and legacy members?
For historical perspective, Victory Electric was formed in 1945 and has been serving rural (legacy) members of southwest Kansas for 72 years. In 2007, Victory Electric (and five other cooperatives) formed Mid‐Kansas Electric Cooperative (MKEC) to purchase the former Aquila electric properties. This included several urban areas including the city of Dodge City, Spearville, Ford, Bucklin and others, referred to as our MKEC members. On the map, the dark green indicates MKEC area and light green is legacy.

When the new MKEC members were absorbed into the legacy cooperative, MKEC policies, procedures, fees and charges, rates and rate structures were not changed in an effort to reduce rate shock and make the transition easier for the new members. This created several issues, namely that not all “like” members were paying the same rates and there were different processes and procedures being applied, depending if a member was a legacy or a MKEC member. We have been working in the past few years to align the legacy and MKEC policies, procedures, fees and charges so all members are treated fairly. This proposed rate change will help move the needle in bringing the two sides of the system together, gain efficiencies in services, and reduce the costs associated with operating two separate distinct systems.

 

Who decides when a rate increase is needed?
Victory Electric’s board of trustees set the cooperative’s electric rates. Trustees are Victory Electric members who pay the same rates as you. They are elected by you and other members each year. Trustees want to ensure electric rates are adequate to maintain a solid financial condition, provide the necessary revenue for delivery of reliable electric service, and avoid the subsidization between rate classes.Victory Electric sells power to its members at cost, not for profit. We certainly want to avoid rate increases, but we also need to ensure the long-term financial health of the cooperative. You can learn more about your trustees and who represents your district by visiting http://www.victoryelectric.net/content/board-trustees-and-management-team

 

Who determines the amount of the rate change?
The board of trustees and employees of Victory Electric work every day to achieve operating efficiencies to help keep costs low. As your local, not-for-profit electric cooperative, our primary goal is to minimize the effects of any rate change while maximizing service in a cost-effective, reliable manner you can count on.

Victory Electric’s member-elected board of trustees want to ensure Victory Electric will have adequate revenues for the next few years. Secondly, the board wanted to combine the legacy side of the system with acquired Aquila members as much as possible to reduce rate subsidization and ensure fair rates for all members.

In addition to keeping the member’s best interests in mind, Victory Electric’s member-elected board of trustees is also responsible for ensuring electric rates are adequate to maintain the cooperative in solid financial condition. Last fall, Victory Electric’s board of trustees elected to hire an outside, independent consultant to conduct a Cost of Service Study (COSS). The COSS is an important tool used in setting utility rates. The COSS fairly and equitably breaks down the costs of providing service to each rate class. Each rate class has unique load and service characteristics that impact the costs for that class. The COSS findings offer useful guidelines to assist the board in responsibly allocating costs to each class of members in a way that avoids any class paying more than their fair share.

 

Who oversees the rate change process?
Careful oversight is maintained at every step in the rate change process. The consulting firm was instructed by the board and management to develop their study using standard methods developed by regulatory authorities across the country and the same methods used by the Kansas Corporation Commission (KCC) when Victory Electric was still regulated.

 

What is causing the increase?
We understand our members do not want to pay more each month on their electric bill, but a rate change is needed to keep Victory Electric in a solid position to meet financial and loan obligations and keep up with rising costs, inflation and other external pressures.

  1. In particular, in the seven years since our last rate change, we have seen a significant increase in property taxes.
    1. In 2010 our property taxes were $1,573,865, and in 2015 we paid $2,518,096, an increase of $944,231, or 60 percent.
    2. At the time of our last rate change, our operating margins were $1,645,222 and in 2015 margins were $376,657, a decrease of $1,268,565, or 77 percent.
    3. So you can see the $944,231 increase in property taxes attributed to 74.4 percent of the decrease in operating margins.
  2. Storm damage
    1. For example, the May 2016 tornados cost approximately $300,000 in damages, and that was just one storm, the added costs of storms throughout the year is significant.
  3. Increase in cost of materials
  4. Improving margins as required to meet financial obligations
  5. Capital expenses to maintain system reliability (upgrading line, substations, etc.)
  6. Escalating environmental compliance costs including the EPA’s Clean Power Plan and U.S. Fish and Wildlife’s attempts to list the Lesser Prairie Chicken as a threatened species. 
     

What is Victory Electric doing to keep the cost of electricity down?
Rates changes are often due to both controllable and uncontrollable costs. Victory Electric continuously looks for ways to minimize these changes. Victory Electric strives to operate efficiently while adhering to our commitment to providing affordable, high quality and reliable electric service. We continuously evaluate our operations in an effort to keep your rates as low as possible by:

  1. Refinancing debt
  2. Streamlining internal processes
  3. Hired consultants to reduce property tax expense that saved the cooperative $335,342 in two years.
  4. Invested in technology to help reduce costs
    1. Implementing the Advanced Metering Infrastructure (AMI) that helps us to recognize potential service issues, restore power faster and more efficiently, remove the need to dispatch personnel to read meters, connect service to new members, or to locate outages. This allows Victory Electric to reduce operating costs while providing superior service to members.
  5. Victory Electric also acts as an advocate for our members by representing Victory Electric on the board of directors of both Sunflower, Mid-Kansas and KEPCo, our three electric power providers. This role enables us to participate in the budgeting and planning processes of our power providers.

 

Why do you raise rates so many times?
The common misconception is that Victory Electric changes rates each month or whenever we want. This is false. In fact, we are required to give all members notice of any rate increase and hold a public meeting where members can ask questions and make comments. Just like I am doing now. Pictured is a copy of a friend’s electric bill from 2010 and from 2016 that clearly shows our energy charge is still the same. Please note: The Energy Charge Adjustment (ECA) fluctuates each month and is a direct pass through from our power supplier and can change each month based on the cost of fuel for generation.

 

How can members get more information and voice their opinions about this rate case?
Because Victory Electric is a cooperative, our members are also owners of the cooperative and have a voice in decisions made by their elected trustees. We invite our members to attend a public listening meeting to ask questions and learn more about the proposed rate change and talk to co-op trustees.

Public Listening Meetings
Wednesday, January 25 - 5:30 p.m at Victory Electric
Wednesday, February 15 - 5:30 p.m. at Victory Electric

Special Board Meeting
Friday, March 24 - 9 a.m. at Victory Electric

 

Why such a large increase all at once? Why not gradually in steps?
6.7 percent initially sounds like a large increase, but remember this is our first retail rate increase in six and seven years.

 

Will the Energy Cost Adjustment (ECA) change?
The ECA is going to be reset to reflect the current power supply costs. This means the ECA charge will be set to zero. As time goes on, if the costs of generating power changes from today’s costs, the ECA will reflect that change, whether that be an increase or a decrease.

 

Will every member see a rate change?
All members will see a rate change. Commercial and industrial members will see varying rate changes, some a smaller increase, or no increase. This is because they have been subsidizing other members with our past rate structures, and we’re trying to create fair rates that reduce cross-class subsidies.

 

When can members expect the next rate change?
Rate changes are very unpredictable and are influenced by many different factors. Many of these are unplanned and can be tied to rising costs for materials, property taxes, storm damage, etc. We are committed to doing our best to minimize the impacts of these issues by being proactive in our planning, offering education and training on energy efficiency programs and focusing on maintaining the reliability, quality and integrity of our systems. Victory Electric has not had a rate increase in six and seven years, and we never want to raise rates.

 

Why are your rates so much higher than other neighboring utilities?
They’re not. On average, Victory Electric’s rates are generally lower than those of other utilities serving consumers in the state of Kansas. Based on our recent research, compared to the 30 (31 utilities on the chart because Victory is listed twice) other electric cooperatives across Kansas, Victory Electric’s current residential kWh rate is the third lowest. 

Compared to Kansas investor-owned utilities, we are slightly cheaper, which is great considering their customer density and number of meters per mile of line is a lot higher. Being in rural western Kansas, our number of meters per mile of line is fairly low, which means our costs per member are significantly higher to provide electric infrastructure and deliver electricity.

Please note this data is 2017 rates based on 2015 data, therefore other utilities may have raised rates since 2015 data was published.

How do Victory’s Rates Compare to Increases in Other Products
While our prices have not increased since 2010 and 2011, there are very few other items, if any, that have not risen in price in the last six to seven years. In our homes today, electricity has become a very important part of our lives. Electricity powers the pump for our water and it heats our homes in the winter months. It chills our food, allowing us to store perishables for days at a time and it lights our homes to allow us to read and work at night. The electricity we use powers the machines that make many products we use daily such as the clothes on our backs, the automobiles we drive, and the furniture on which we sit.
 
The consumer index chart indicates what electric rates for Victory Electric have done since 2010. It also shows the cumulative rate of inflation as measured by the Consumer Price Index for the same time period. Clearly, one dollar today does not purchase the same amount of any commodity as it did at the time of our last rate change. 
 
As an example, let’s talk about how prices have changed for some items we use every day. In 2010 the average price for a loaf of bread was $1.37, and the average price for a dozen eggs was $1.16. The price for a gallon of milk was $3.20, and a postage stamp was $0.44. Today’s prices are significantly higher. The price of postage, for instance, is now $0.49; this represents a 11.4 percent increase. The average price of a gallon of milk is now $3.42, which is over a 6.9 percent increase. Eggs today are priced at an average of $2.47 per dozen, which represents a 113 percent increase. Bread today is averaging $1.44, which is nearly a 5.1 percent increase.

What is the co-op doing to help members manage their bills?
Victory Electric offers a number of options to help members manage their electric bills. Some of the services our members find valuable are automatic payment options, budget billing, or monitoring energy use daily/weekly/monthly with our secure online energy portal called MyMeter.

​MyMeter is a web-based energy tracking service that provides daily energy use information and tools for greater control over your electric bills. MyMeter is a free service that can be accessed on Victory Electric’s website from a computer, tablet or smart phone to help you monitor how much electricity you’re using each day. It allows you to monitor your power use at your convenience, updates your data every 24 hours so you can adjust your energy consumption according to your lifestyle and budget, and it can project the amount of your monthly bill.

 

If I’m having trouble paying my bill, what options are available to me?
Victory Electric understands that sometimes life gets tough and it’s a struggle to stay current on your bills. We can help you get back on your feet with payment plans.

Victory Electric members can also take advantage of our Budget Billing Plan. Budget Billing prevents drastic changes in your bill, even in the coldest and hottest months of the year. Budget Billing is based on the past 12 month’s average charges. Once the average is calculated, you will receive a bill every month using the calculated average. Your calculated average will be re-evaluated every year, on the anniversary month of you signing up for Budget Billing. For more information, visit our payment options page.

 

What is the difference between buying power from an electric cooperative and an investor-owned utility?
Victory Electric is a not-for-profit electric cooperative. As such, we are owned and controlled by our members. You elect a board of trustees, which oversees the operations of your cooperative including the rate structure. As members of an electric cooperative, the rate you pay for electricity is based on the wholesale rate Victory Electric pays for electricity plus a small margin for operating expenses. The not-for-profit nature of cooperatives states that any net profits made by the company must be paid back to the membership in the form of capital credit refunds. 

On average, Victory Electric serves seven members per mile of line, whereas municipal utilities and investor-owned utilities serve on average 30 to 60 members per mile. Our costs per member are double that of IOU’s and municipalities, but their revenues per mile of line is three to five times more, therefore they are much better positioned to spread their fixed costs. It costs more than $38,000 to build one mile of single-phase line (or to re-build one mile of old line), and $79,000 for one mile of three-phase line. Nonetheless, Victory Electric’s rates are generally lower than those of other utilities serving consumers in the state of Kansas. 

Investor-owned utilities are in business to show a profit for their investors or stock holders. Profit is inherent in their rate structures and is passed along to their investors in the form of dividends on their investment. Profits do not go back to the consumer.

While virtually all aspects of today’s cost of living continue to rise, we pride ourselves on avoiding routine price adjustments. We also live by the cooperative difference - as a cooperative, we are not driven by profits and making a return for shareholders. Neighboring investor-owned utility, Westar, cannot say the same. They have raised rates 26 times since 2009. http://www.kwch.com/content/news/Westar-asking-for-one-percent-rate-increase-398742781.html

In 2014, the membership voted to self-regulate, is that why you are raising rates?
No. The vote three years ago was simply a vote to self-regulate and not be under the jurisdiction of the Kansas Corporation Commission. The State of Kansas has allowed electric cooperatives the option to self‐regulate since 1992.

Legislation passed in 2009 allowed additional cooperatives to vote for self‐regulation. The enabling legislation is K.S.A. 66‐104d.

Although we are no longer regulated, Victory Electric’s board of trustees established a policy that governs the process to change rates, adding more opportunities for member information and feedback. Two of the steps included in the policy are also required by Kansas law. Notice of the time and place of any board meeting when rates will be discussed and voted on must be sent to members ten days before the meeting, and that meeting must be open to members. As listed earlier, our special board meeting is scheduled for March 24, at 9 a.m.

Victory Electric is still subject to other state and federal environmental, safety, reliability and labor regulations. Certain functions still remain under KCC authority, regardless of being self-regulated.

Also, it is important to note, that while Victory Electric is still following guidelines set by the KCC for member notification and hiring a rate consultant to do a Cost-of-Service-Study, by being self-regulated, we save hundreds of thousands of dollars in legal fees; processing fees to the KCC and the Citizens Utility Ratepayer Board (CURB); hourly fees for lawyers; KCC staff time for asking questions, reviewing the answers, reviewing materials submitted to the agency; and costs to officially publish information about the proceedings in the Kansas Register.

 

What if I have a dispute about my bill or quality of service?
Victory Electric already attempts to resolve complaints at the earliest opportunity. That will not change, so Victory Electric employees will continue to be the first line of contact for service and account issues. However, members may escalate unresolved complaints to the board of trustees.

 

Why have I not been paid any of my capital credits?
As a member, you have a share in the earnings of your cooperative. Victory Electric’s rates are set to bring in enough money to pay operating costs, make loan payments, and provide an emergency reserve. Any revenues above the cost of doing business are considered margins and are returned to you, the member, in the form of capital credits. These margins represent a loan of operating capital by the membership to the cooperative. This capital allows Victory Electric to finance operations with the intent this capital will be repaid in later years.

Each year, every member is allocated capital credits that appear as an entry on the permanent financial records of the association and reflect your equity or ownership in Victory.

When Victory Electric purchased the electric assets of Aquila in 2007, loans were taken out to finance the purchase. When a business’s debt increases, equity decreases. Our lenders require Victory Electric have a certain equity level before capital credits can be retired, or paid out. Since the purchase in 2007, we have slowly been building that equity level back up, and with the rate change, we will be in a better financial position to retire capital credits. In the future when any capital credits are retired, a check or credit will be issued for your pro-rata share of those retirements.

What is the service availability charge?
The service availability charge covers the cooperative’s fixed costs and is reflective of the investment in poles, wires, transformers and equipment it takes to provide you with electric service. It also supports fleet, facility and member service functions, such as line maintenance, substation upgrades, property taxes, right-of-way clearing, and general administrative responsibilities and is similar to service or facility charges that other co-ops and utilities charge. Regardless of how often you flip on the light switch or the TV, these costs are part of the bill you pay so electricity is available to you whenever you want it.

If one member uses only one kilowatt-hour of electricity and another member uses 100 kWh, Victory Electric still incurs the same cost to build the line, maintain the distribution system and deliver electricity to both customers. It takes just as much equipment to deliver one kilowatt-hour as it does 100 kilowatt-hours of energy. This is why the monthly service availability charge is important to recover a portion of the cost of delivering electricity to all members and help maintain the financial health of your cooperative

 

Why not raise the kWh energy charge instead of the service availability charge?
As explained above, the service availability charge is the base cost it takes for Victory Electric to get power to your home, regardless of your monthly power use. The kWh energy charge is designed to recover variable costs, including the cost of power from our power provider, environmental and conservation efforts, capacity requirements, and more. The energy charge is determined by multiplying the total amount of electricity consumed during the billing period, measured in kilowatt hours (kWh), by the energy charge rate. Wholesale energy and capacity costs are about 70 cents of every dollar that you pay.

 

Why is the Service Availability Charge different for residential, commercial, and industrial members?
Different kinds of users require different configurations of lines, transformers and substations. Each configuration bears very different costs, which are allocated appropriately to each rate class. That way, no rate class is paying for the needs of another rate class, which is fair and equitable.

 

What are some no to low cost ways to save on monthly electric bills?

  • Lower your water heater setting from 140 degrees to 120 degrees.
  • Each time you lower your thermostat one degree in winter, you can save three percent on your heating bill. If you lower it three degrees, for example, you can save nearly ten percent on energy costs. The same is true of summer. Raise the thermostat one degree and save about three percent.
  • Every time you replace an incandescent light bulb with a CFL or LED equivalent, you save on electricity.
  • Caulking around windows and doors, making sure weather stripping around doors and windows is tight, and taking other actions to seal your home can save up to ten percent on heating and cooling costs per year. 
  • Find more tips on our Energy Savings page
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