Numbers Behind the Power: Understanding Electric Cooperative Wholesale Rates

Numbers Behind the Power: Understanding Electric Cooperative Wholesale Rates

When was the last time you took a close look at your electric bill? If you’re like most, you probably don’t review it often and, when you do, it can be tempting to just scan and focus on the bottom line. We get it, time is short, and life is busy. But it’s important to gain a good understanding of what the charges on your electric bill mean.

A lot goes on behind the scenes within our cooperative family to calculate electric rates—from the wholesale level to the retail level— and this article breaks down how everything comes together to create the amount you pay each month.

The Journey of Electricity

Understanding all that goes into your electric bill starts with learning how electricity is made and how it’s delivered to your home. Before your local electric co-op can send electricity to your home, that electricity must be created by a generation unit. In our cooperative network, the electricity you receive at your home is a combination of energy created by wind, hydropower, natural gas, coal or other fuels. Electricity is generated at the same moment it’s needed and wholesale power providers like East River Electric Power Cooperative and Basin Electric Power Cooperative have a watchful eye on the electric system around the clock making sure your lights come on when you flip the switch. Depending on the weather, the generation mix can vary (if the wind is blowing, there’s more wind on the system; if the wind isn’t blowing, more traditional energy sources are used to meet electric usage).

Once the electricity has been generated, it travels over high-voltage transmission lines to substations, where the voltage is reduced to a lower level. The electricity then travels over distribution power lines and the voltage is reduced again to safely find its way into your home. In our cooperative network, East River Electric owns and maintains the substations and transmission power lines. When severe weather strikes, our local crews in South Dakota and Minnesota are at the ready to quickly make repairs and restore power to the grid.

Understanding Your Power Bill

Now, returning to your power bill, the first thing you might see is a facility or base fee. This is one of three types of costs on your bill. Rates are set based on cost of service studies done at the local co-op to cover its costs. The facility fee is a set amount you pay each month to cover your share of the onsite costs of your distribution cooperative; including metering, billing and local infrastructure. It’s a necessary service charge so all members pay their fair share of the fixed costs for operating the cooperative. All members pay the facility fee regardless of how much energy they consume so they all contribute equally to help keep the cooperative running. In other words, the facility charge that you see on your monthly bill funds the local distribution cooperative and is not directly related to the cost of East River Electric’s wholesale power. The facility charge can vary by cooperative and determined by the number of members who are supporting those costs. A cooperative with 2 meters per mile of line will likely have a higher facility fee than a cooperative with 4 meters per mile of line because the more rural co-op will have more infrastructure and fewer consumers in which to spread the cost.

The next two types of costs are usually combined as an energy fee on your bill, which is based on your electric usage each month. The energy you use at your home or farm is metered and charged on a kilowatt-hour (kWh) basis. The kWh rate is made up of wholesale power costs, including the generation and transmission needed to get the power from a generation unit to your local cooperative. A lot of things are considered when setting a wholesale power rate – construction costs, interest rates, regulatory requirements, depreciation of assets, materials, labor and more. Some of those costs are controllable, others are not.

One great benefit of being a member-owner of a not-for-profit electric cooperative is that you have a say in how our cooperative network is run. East River Electric is governed by a board of directors made up of representatives from our member systems. East River is also cost-based, so our rates are set by our members in a way that allows us to collect enough revenue to pay for providing power, with a small margin to meet lending requirements and plan for any unexpected costs. Those margins (money made over the cost of providing power) are given back to the members who own the cooperative. That’s something you won’t see from a for-profit company.

Generating and distributing power is an intricate business and involves a lot more than the generation of electricity, but rest assured that East River Electric will always meet the necessary demand to provide safe, reliable and affordable electricity to the region’s consumers.

PUC Approves Construction Permit for Wild Springs Solar Project

PUC Approves Construction Permit for Wild Springs Solar Project

MEDIA CONTACT: Leah Mohr, South Dakota Public Utilities Commission, (605) 773-3201 or (605) 280-4327

PIERRE, S.D. – The South Dakota Public Utilities Commission today approved a construction permit for the Wild Springs Solar Project to be built in Pennington County. The decision allows Wild Springs to move forward with plans to construct a solar energy facility capable of generating up to 128 megawatts of energy one-half mile south of New Underwood, South Dakota.

Wild Springs, PUC staff and the Burndorf Family Trust, the docket’s only intervenor, previously presented a settlement agreement that was accepted by the commission at their meeting on Nov. 12, 2020. The agreement resolved all issues except for the appropriate decommissioning financial assurance. The commission’s action this week was to rule on the proposed decommissioning condition submitted by Wild Springs and determine if a permit should be granted.

“It’s extremely interesting and very exciting to see this type of renewable energy project being developed in South Dakota,” said PUC Chairman Gary Hanson. “Ten to 20 years ago, solar energy wasn’t considered a viable option for our state because we didn’t have the right climate for it. It’s exciting to see that technology has grown and investors are willing to support a renewable energy that has very few challenges from the standpoint of aesthetics or noise or anything of that nature,” he stated.

The approved permit will include 38 conditions that must be adhered to during the construction and operation of the project. Land restoration, potential impacts to threatened and endangered species, post-construction breeding bird surveys and associated nest monitoring, and the financial assurance for future decommissioning are all among the details the conditions address.

“Decommissioning financial assurance is something we’ve been dealing with for the last three years on various projects. We’ve talked about a lot of different options and an escrow account is the one we’ve adopted up to this point; partly because until now, we’ve never had a bond presented to us in a manner that was irrevocable. In this case, the applicant has figured out a way to give us the assurance that no matter what happens to the owner, the bond will remain in place,” stated Vice Chairman Chris Nelson. “I greatly appreciate the time staff has put in to initially raise the question of whether this was appropriate and then to work through the details with the applicant to ensure that this will work long term,” he continued.

The proposed solar project will span up to 1,499 acres of privately-owned land and plans to include approximately 340,000 solar panels. Other components of the project include inverters, a tracking rack system, fencing, access roads, a substation, an operations and maintenance building, a parking lot, electric collection lines, up to three weather stations and temporary construction areas.

“This is South Dakota’s biggest solar project to date. We at the PUC have had a lot of experience with wind development in the last few years, but in certain regards, solar is different. I appreciate the efforts made by PUC staff and the applicant to help us ensure our landowners will be well protected,” said Commissioner Kristie Fiegen.

Wild Springs expects to complete construction of the $190 million facility by the end of 2022. Upon completion, the project will interconnect to the New Underwood Substation owned by Western Area Power Administration, located adjacent to the project area. The energy produced by the solar facility will be purchased by Basin Electric Power Cooperative.

Wild Springs filed its application with the PUC on May 15, 2020. The PUC held a public input hearing telephonically on July 1.

The Wild Springs Solar Project docket can be viewed on the PUC’s website at
www.puc.sd.gov, Commission Actions, Electric Dockets, 2020 Electric Dockets,
EL20-018 – In the Matter of the Application by Wild Springs Solar, LLC for a Permit of a Solar Energy Facility in Pennington County, South Dakota.

Photo Caption: East River Electric Power Cooperative’s Chief Member and Public Relations Officer, Chris Studer, was part of the solar project announcement at a news conference in February.

Electric Cooperatives Were Built by Neighbors Helping Neighbors

Electric Cooperatives Were Built by Neighbors Helping Neighbors

Neighbors helping neighbors. It’s a common phrase heard in rural America. We step up when our neighbors need help. That’s how the cooperative movement started around here. Neighbors made a promise to each other and worked to see it through. Oil and agriculture cooperatives sprung up to provide needed services. Electric co-ops were created by neighbors helping neighbors get electricity to the farm or ranch to benefit all rural families. Back then, people all across our region made a promise to each other: We’re going to work together to bring power to the prairie. People gathered together to help build their electric cooperatives by signing up their neighbors to bring electricity to rural areas that had never had it before; a service that no one else would provide. It’s made a profound difference in agricultural production, business and life in rural America. And then, those cooperatives made promises to neighboring cooperatives to create East River Electric, to provide a stable and reliable power supply to their local cooperatives.

Electric cooperatives today are still made up of member-owners that are accountable to each other. We do what we say we’re going to do. That means sticking with our commitment to provide reliable, affordable electricity to our neighbors.

Dakota Energy Cooperative headquartered in Huron has filed a legal complaint against its wholesale power supplier East River Electric Power Cooperative based in Madison. Through the legal complaint, Dakota is seeking to buy out of its long-term wholesale power contract they recently signed to take risks on the spot energy market with a for-profit company called Guzman Energy. They made a promise long ago to work together with surrounding cooperatives to create East River Electric and provide for long-term wholesale power supply. By attempting to break that promise to their fellow electric cooperatives, Dakota could end up paying more in the long run and leaving neighboring co-ops with higher costs. That’s not the co-op way.

The other cooperatives in our region want to continue working together to take advantage of economies of scale and the collective strength that our network provides and honor the promise they made to their rural neighbors. By keeping our cooperative family whole and helping our neighbors, we can continue to provide safe, affordable and reliable electricity for the long term.

East River Crew Helps Madison Prepare for Christmas

East River Crew Helps Madison Prepare for Christmas

East River Electric Cooperative’s Madison crews removed a large evergreen tree from Dakota State University’s campus to be donated as the Community Christmas Tree. They transported the tree from campus to the Dairy Queen parking lot. Employees from the City of Madison assisted East River in setting the tree. The Madison Area Chamber of Commerce will be hosting a Community Christmas Tree lighting on Saturday, December 5. Watch the Chamber’s Facebook page for a livestream of the lighting ceremony.

Thanksgiving Food Drive a Success!

Thanksgiving Food Drive a Success!

East River employees participated in a Thanksgiving food drive for the Lake County Food Pantry. Employees donated a combination of groceries and over $100 in cash to provide 24 complete Thanksgiving meals for local families. The meals included ham, dressing, potatoes and gravy, side dishes and desserts. Thank you to the Employees Committee for organizing the food drive.