Archive for Sunday, September 28, 2003

Rural residents paying highest prices for electricity

September 28, 2003


— Nearly seven decades after rural electrification brought power and a better life to the nation's farms, rural Kansas residents are stuck paying some of the highest electric bills in the nation.

These small, member-owned electric cooperatives are saddled with many of the costs from building the Wolf Creek nuclear power plant, as well as the expensive Sunflower power plant in Holcomb, said David Springe, a spokesman for the Citizens Utility Ratepayer Board, a Topeka-based consumer advocacy group.

And unlike municipal public utilities or bigger investor-owned companies, rural electric co-ops usually serve sparsely settled areas with few industrial customers to help carry the costs.

All that adds up to rural Kansas customers paying far higher electric bills than their city neighbors.

Rural cooperatives

About 20 percent of Kansas residents get their power from rural electric cooperatives, with roughly 80 percent of the state's area served by these small co-ops, said Stuart Lowry, attorney for Kansas Electric Cooperatives Inc., the industry's trade group.

"That kind of illustrates the consumer density issue," he said.

In 1935, President Franklin D. Roosevelt created the Rural Electrification Administration, which offered low-interest loans to bring electricity to rural America.

Those early loans helped form the electric cooperatives that today still provide power throughout America's countryside. Kansas has 27 electric co-ops.

Nationwide, rural cooperatives serve to 13.6 million residential customers each year. In Kansas, rural electric cooperatives provide power to 135,811 Kansas homes, according to figures compiled by the Kansas Corporation Commission. An additional 45,000 commercial and 6,000 industrial customers, as well as 12,800 other customers also are served, according to KCC figures.

Wichita (ap) -- Average costs per kilowatt hour, including energy costs and other customer charges, by Kansas rural electric cooperatives: ¢ Alfalfa Electric Co-op, 8.94 cents¢ Ark Valley Electric Co-op, 10.52 cents¢ Bluestem Electric Co-op, 10.14 cents¢ Butler Rural Electric Co-op, 9.71 cents¢ Caney Valley Electric Co-op, 11.30 cents¢ CMS Electric Co-op, 10.24 cents¢ DS&O; Rural Electric Co-op, 8.98 cents¢ Doniphan Electric Co-op, 7.93 cents¢ Flint Hills Rural Electric Co-op, 10.29 cents¢ Heartland Rural Electric Co-op, 10.16 cents¢ Jewell-Mitchell Co-op, 9.62 cents¢ Kaw Valley Electric Co-op, 8.05 cents¢ Lane-Scott Electric Co-op, 9.40 cents¢ Leavenworth-Jefferson Elec, 9.45 cents¢ Lyon-Coffey Electric Co-op, 9.87 cents¢ Midwest Energy, 7.52 cents¢ NCK Electric Co-op, 11.29 cents¢ Nemaha-Marshall ECA, 7.49 cents¢ Pioneer Electric Co-op, 5.87 cents¢ Prairie Land Electric Co-op, 9.71 cents¢ Radiant Electric Co-op, 9.95 cents¢ Sedgwick County Electric, 8.14 cents¢ Smoky Hill Electric Co-op, 10.31 cents¢ Sumner-Cowley Electric Co-op, 11.20 cents¢ The Brown-Atchison ECA, 9.50 cents¢ The Ninnescah Rural ECA, 8.63 cents¢ Tri-County Electric Co-op, 11.82 cents¢ Twin Valley Electric Co-op, 11.21 cents¢ Victory Electric Co-op, 7.23 cents¢ Western Co-op Electric, 8.70 cents¢ Wheatland Electric Co-op, 8.49 centsSource: Energy Information Association's "Annual Electric Power Industry Report" released in January using 2001 data.

The average cost of a kilowatt of power paid by a residential customer to a Kansas rural co-op was 9.7 cents per kilowatt hour in 2001, the most recent available data. That's well above the 7.9 cents per kilowatt paid to rural cooperatives nationwide.

By contrast, investor-owned Kansas utilities get an average 7.3 cents per residential kilowatt hour while publicly owned Kansas utilities get 7.9 cents per kilowatt hour.

Overall, Kansas customers pay less for their power than the national average because rates to investor-owned utilities here are much lower -- despite the higher-than-average rates paid by the rural cooperatives.

Still, few places in the state have complained more loudly about high electric rates than Wichita. The same 2001 data shows the average residential costs charged by Kansas Gas and Electric, now Westar Energy, at 8.1 cents per kilowatt hour.

But that palls in comparison to what customers of rural cooperatives just outside Wichita city limits are quietly paying for electric service.

In the nearby Sumner-Cowley Electric Cooperative, for example, rural residents paid an average 11.8 cents per kilowatt hour -- far higher than both the state and national averages for electric co-ops, statistics show.

Cletas Rains, manager of Sumner-Cowley Electric Cooperative, blamed his high rates on the fact his 4,200 members are spread over 2,000 miles of line. Another reason is that Sumner County has one of the state's highest tax rates -- which adds about one cent of taxes per kilowatt hour


"If we weren't there, they wouldn't have power out there," Rains said.

But there is little, if any, oversight of those co-op rates in Kansas.

In 1992, the Legislature passed a law giving small rural cooperatives the option of deregulation. All but two have since voted to pull out of state oversight from the Kansas Corporation Commission.

Rural electric co-ops maintain that deregulation has saved them thousands of dollars in regulatory costs.

"There has probably been very little direct impact on the customers of the cooperatives -- other than cost savings," Lowry said.

In the last five years, Kansas has had more rate decreases than rate increases among cooperatives because wholesale rates have gone down, said Doug Shepherd, vice president of member services for Kansas Electric Cooperatives. But wholesale costs are inching up again, he said.

"I think electric rates are where they are now as you would see them if they were regulated," Shepherd said.

Lack of oversight

But others are not so sure Kansas rural electric consumers are better off now than they were before deregulation.

"It is a tough question. I would suggest most consumers would want some regulatory backup to make sure there are not excessive costs at the local level," Springe said. "On the other hand, if the co-op's theory of regulation is right -- if enough consumers are upset by the rates, they are empowered by their voting to do something about it."

Since the electric cooperatives are member-owned, the customers elect their own board of directors, who then set the rates and oversee operations of the cooperative.

Co-op customers can also petition for KCC to intervene if the board changes electric rates, but that has not happened since the 1992 deregulation, Lowry said.

"In the scheme that was designed there is oversight by the individual (co-op) boards as opposed to a state authority," said Marge Petty, spokeswoman for the Kansas Corporation Commission. "I think the important thing for consumers is that there is somebody providing that oversight."

Whether rural residents are actually paying attention to what their electric cooperative is doing is a matter of debate.

"I'm not a believer in the co-op's theory of regulation -- I don't think we see it in practice. You would think there would be more activism at the local level," Springe said.

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