Rate Design

BEC’s Cost of Service Analysis (COSA) is complete. Rate design analysis is complete.
New rates go into effect April 1, 2021.

Why are we evaluating possible changes in how to bill members?

The BEC Cost of Service Analysis (COSA) completed in June 2019, indicates that BEC is collecting the right amount of revenue (+/- 10 percent) from each of the member rate classifications: residential, small commercial, large commercial, industrial and irrigation. Taking it one step further, the BEC board must ensure equity among members within each rate class, predictable and stable rates for all members, and predictable revenue for BEC to ensure financial stability.

BEC’s residential and small commercial rate design includes a rate for energy and a base charge to provide all other revenue. Base charges provide less revenue than needed for system and service costs, while revenue from the energy rate covers more than the cost of electricity. With a sizable portion of BEC’s fixed costs financed by the variable monthly energy revenue, the co-op is subject to unpredictable financial impacts. Changing weather patterns are a huge variable that directly impacts kWh sales. With 80 percent of BEC members billed an identical base rate in the residential class while their power requirements differ, the fairness of the rate structure needs examination. The risk management committee is looking for the best rate structure to bill individual members fairly and provide predictable co-op revenue to purchase power, finance and maintain a safe and reliable distribution system, and run the business to provide services efficiently.a women operating a slide deck projected onto a screen. Slide reads "Rate Setting Process - Step 2" and shows a flow chart below.

Are there alternatives?

To address potential inequities with rate classes, the risk management committee is examining the pros and cons of various rate designs, including a three-part rate design for residential and small commercial classifications. A well designed and administered three-part rate design would use a base charge to capture the costs of running the business to provide services. A system charge would cover the operating and maintenance costs necessary to keep the lights on and distribute power to each member.

An energy charge would represent the wholesale cost of power and delivering it to the BEC distribution system. This type of rate design fairly allocates costs and does not allow for the cross allocation of expenses. The analysis may show that a three-part design is more equitable for BEC members than our current two-part approach with costs captured from only a base charge and energy rate. With a three-part rate, each member in a rate classification pays a base charge to manage and administer day-to-day business functions. Each member pays according to how much actual load they place on the distribution system. Each member pays for how much energy they use.

Why are we doing this analysis now?

In part because we have all the necessary tools in place to do it right. BEC has the tools to examine costs, energy use and patterns, and member requirements. Current meter information accurately reflects power costs. Our powerful updated forecast model generates “what-if” analyses in real-time to help us analyze the impacts of potential rate design changes.

Cost of Service Analysis and Rate Design Information

All BEC members are invited and encouraged to attend both committee and board meetings to participate in the project process. If you are not able to attend the meetings, below are links to all articles, reports and presentations provided to date. If you have questions, please do not hesitate to call the office at (406) 446-2310 or contact any board trustee or risk management committee member.

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