Correction: The story was updated to clarify the name of the proposed charge and the date and time of the Board of Directors' meeting.
By JAMES BELL
Hays Post
This week, area residents will have the opportunity to hear directly from Midwest Energy about proposed changes to how residential and small business customers will be billed for their energy consumption.
The proposal would change billing from a two-part rate structure to a three-part structure, with the inclusion of a "demand" charge for residential and small-business customers across their footprint.
The change would align the company with many other electric companies across the region and is designed to create a pricing structure that better reflects the demand placed on the system by customer energy usage.
The change would be phased in over four years and, without consumption changes, would likely have little impact on customer bills as the demand charge is offset by a decreasing energy charge, according to Mike Morley, director of corporate communications and government affairs.
“I think for the vast majority of people, there is going to be very, very little impact,” Morley said. “Either way, they'll either be saving a little bit of money or they'll be paying a little bit more, but we're talking about just a couple of bucks a month.”
He said examples of bills as they would read now and how it would look after the change have been posted to the Midwest Energy website.
“We've picked out some real-world examples of Midwest Energy customers,” Morley said. “And what you're seeing when you do that, in three of the four scenarios that we just kind of randomly picked … only in one of the scenarios was the bill higher. And it was about $4 higher per month in year four than it is today.”
A revenue-neutral proposition
If adopted, the demand charge will be revenue neutral for the cooperative.
“As [the demand charge] is introduced, the energy [charge] cost goes down,” Morley said. “The energy cost today is 7.8 cents. By the end of year four, it's down to 4.2 cents. So even though people are starting to pay a little bit for demand, they will be paying less for their energy charge.”
But he said with the addition of a demand charge, Morley said customers have more control over their bills.
Today to save money, a customer must lessen energy usage, but with the addition of the demand charge, customers can save by lowering usage or by limiting their usage at one time.
“The point of the demand [charge] is to send a price signal that customers who put a heavier stress on the grid should pay for putting the heavier stress on the grid,” Morley said. “They should pay for that. The customers who don't stress the grid as much shouldn't have to pay quite as much.”
Ultimately the new three-part structure proposal creates billing that better reflects the effect of their usage on the system.
“It is a much more accurate way to bill people for the impact that they put on the grid and for the energy that they themselves use instead of just becoming an average residential customer and a statistic,” Morley said. “It's a very, very specific and very accurate way to bill.”
Lower peak demand=lower cost
When Midwest Energy purchases energy, it is also subject to demand charges, so if overall demand can be lowered, Morley said the company could save costs that would be spread across the cooperative.
“We have to have a grid that can meet our highest capacity for the year, and we pay for that year-round, even though we only use that capacity for just a couple of days out of the year,” Morley said. “The analogy we use is that we paid to build and maintain a four-lane highway that's used as a four-lane highway once a year, but the rest of the year, we get by just fine with two lanes of traffic.
“For Midwest Energy, our peak demand as a system, about 350 megawatts is our absolute peak, and we'll hit that usually for just a couple days in July or August,” Morley continued. “The rest of the year, we're below 200. … That’s why we're trying to send a price signal that how you use electricity is just as important as how much electricity.”
While new to small business and residential customers of Midwest Energy, the demand charge has been adopted by other utilities with increasing frequency in recent years.
And many industrial customers across their footprint have been subject to a demand charge for over a decade.
If adopted, the demand rates will be placed on customer bills beginning Jan. 1. Demand rates are also currently available for customers in their online accounts.
During the first year, however, the demand rate is for informational purposes only.
“We’re serious about trying to educate people about this change. For the first year, demand will appear on bills, but with a $0 charge,” Morley said. “We want people to get comfortable with seeing demand on their bill. We want people to have a whole year of experience, so they know in the summer, this is my typical demand in the winter ... and have an understanding of how that works.”
Small businesses would then begin being billed for demand charges Jan. 1, 2023, he said. Residential customers would see amounts associated with the charge appear Jan. 1, 2024. At the same time, a lower energy charge will offset the new demand charge.
“For residential and small business customers, as demand charges increase during the multiyear phase-in, energy charges will decrease,” according to the company. “The $28 per month customer charge for residential, and the $35 monthly customer charge for small businesses, would not change.”
A series of meetings is underway across the area that will provide area residents the opportunity to hear more about the proposal.
A meeting is planned for 6:30 p.m. Oct. 19 in Great Bend at Great Bend Front Door, 1615 10th St.
Another is planned for 6:30 p.m. Oct. 20 in Hays at the Hilton Garden Inn, 221 W. 43rd St.
“If anyone does have questions or concerns, come to the meeting,” Morley said. “We have a short presentation, it's about 15 slides, it's not a long one, and we leave plenty of time for Q and A. But what we've seen is that those who see the presentation, they have a much better understanding of demand and what the impacts are going to be to them afterward.”
He said the company is also happy to look at individual situations to show the perspective impact on bills as the proposal is phased in.
The Midwest Energy Board of Directors will vote on the proposal during a public meeting at 1 p.m. Nov. 17 at the Hays Midwest Energy office, 1330 Canterbury.
For more information on the proposed rates, visit www.mwenergy.com/residential/demand_rates.