Preparing for the Future

I would like to update KEC members on some substantial developments in a few areas. I am sure this will not come as a surprise to most of you, but KEC’s costs have increased significantly. Similar to the prices we are all paying for fuel and groceries, as well as most goods, the cost of electricity is not immune and is being heavily impacted. For instance, the cost of meters has gone up 15%, vehicles and equipment are up around 25%, poles are up 36% and transformers are up over 50%. Lead times are also becoming very extended from several months to even years. We are continuing to stay on top of this issue.

KEC RATES

KEC recently conducted a costof-service study completed by an independent third-party consultant to evaluate if our current rate structure is covering the associated costs. Since your cooperative is a not-for-profit entity, we are only trying to break even with a small margin that is required by our lenders.These margins are returned to you, the members, on a scheduled rotation in the future — referred to as capital credits.

The cost-of-service study indicated a deficiency in our current rate structure. As a result, we must increase the service availability charge. Beginning in October, this charge will increase by $3 per month, bringing it to $33. In addition, another $3 will be added to the service availability charge in mid-2023. As we previously made you aware, an additional $3 per 1,000 kWh charge was added in January, 2022. This charge will remain in effect but will be periodically re-evaluated and removed as the financials stabilize.

COST OF PURCHASED POWER

Historically, approximately 60% of KEC’s total cost of service has been the cost of purchased power. This cost is highly dependent upon market prices for fuel. Currently, low natural gas supply and unseasonably elevated temperatures have created the perfect storm for supply and demand issues that are driving up the cost of power. The cost of purchased power has increased approximately 30%. The majority of KEC’s power comes from a regional power market of the Southwest Power Pool (SPP), which covers all or parts of 14 states in the central U.S. — the same market from whichmost electric companies, including PSO, OG&E and most electric co-ops, purchase their power — and SPP uses the most efficient generation first. KEC’s rates to members do cover a portion of these power costs but any fluctuations are seen in the PCA or power cost adjustment.

RELIABILITY

You may have seen in the news lately discussions concerning rolling blackouts in a large portion of the U.S. Per N.E.R.C 2022 Reliability Study (www.nerc.com), SPP’s footprint is in an elevated status. If there are no unplanned or forced outages on power plants and the weather is as predicted, we should be okay. If unforeseen circumstances arise there will be a possibility of rolling blackouts to protect the grid integrity. There is a multi-stage process of notifications, and we will keep you updated as we know more.

Please know that Kiamichi Electric is involved and doing what we can to help mitigate these negative impacts as best we can.

Please stay safe this summer, and thank you for understanding.