The electric bill for the average home serviced by La Plata Electric Association will drop by more than $18 in June after the board of directors approved a one-time capital credit return to members.
The capital credit is made possible by LPEA saving a total of $1.5 million after its power supplier, Tri-State Generation and Transmission, reduced its wholesale electricity rates by 2% for most of 2021.
Tri-State announced the rate reduction in price for wholesale electricity two weeks ago. The rate reduction is retroactive to March 1.
The wholesale rate reduction also must be approved by the Federal Energy Regulatory Commission, but Matt Larson, an attorney representing LPEA before the federal agency, said he expected no issue in getting Tri-State’s wholesale rate reduction approved.
The approval should come in the next two months, he said.
The vote to approve the one-time capital credit to members in their June bills passed 11-1. Board Director John Lee, who represents south and west La Plata County in LPEA District 2, was the sole dissenter.
“In evaluating options to pass on the potential Tri-State rate decrease, our first priority was to find the quickest and most effective way to get this money into our members’ pockets now,” said LPEA CEO Jessica Matlock. “It’s been a difficult year-plus for our community, and we want to continue to do what we can to ease that strain.”
Karl Ramsey, LPEA vice president of finance, presented three options to board members about how to deal with the $1.5 million the co-op would save in 2021 based on cheaper wholesale electric rates.
Besides a one-time capital credit, LPEA looked at a permanent rate reduction as well as investing the $1.5 million, principally in fire-mitigation efforts and increasing grid reliability.
“I will throw in some caution. We are in a pretty tenuous situation with the drought, and we might want to spend more on fire prevention,” LPEA board director Joe Lewandowski said. “I don’t think $18 and change will make a whole lot of difference to 99% of our members.”
In the end, Lewandowski, who represents the city of Durango in LPEA’s District 3, voted for the capital credit.
The savings will appear on most members’ June bills, but some members will see the savings on their July bills.
Ramsey said he would have recommended the savings be applied to fire-mitigation efforts if he believed the current budget for fire mitigation was inadequate. But he added, “I think our fire-mitigation budget is adequate.”
Board director Kristen Skeehan said she didn’t think it would be wise to commit the money to fire mitigation without a plan in place beforehand for its use.
“I don’t necessarily want to throw money at something that can’t be used in a wise way,” she said. “I don’t think it would be good to use the money before we have a plan.”
LPEA Board President Britt Bassett said the co-op worked with Tri-State and regulators to realize the savings in wholesale electric rates that allowed LPEA to lower bills in June.
“Working with Tri-State to achieve the rate decreases they promised has been a long and involved process,” he said. “In the end, we won on this front, and we want to pass the fruits of that labor directly back to our membership. This $1.5 million refund is just the first example of that. Looking at Tri-State’s additional 2% decrease next year, we are evaluating more options to pass this through to our members in the future.”
Tri-State board of directors has also committed to another 2% drop in wholesale electric rates in 2022.
Ramsey said LPEA staff members recommended savings from the drop in wholesale electricity be passed on to members through a one-time capital credit rather than a rate reduction because a cost-of-service study that more adequately examines all the variables that determine rates is planned for later this year.
“It’s premature to do a rate reduction, when we have a cost-of-service study beginning this week,” Ramsey said.
Additionally, LPEA is experiencing cost inflation with materials, equipment and services, and passing on a one-time capital credit would give the co-op more time to gauge the long-term impact of inflation before it committed to more permanent reduction in rates.
Ramsey estimated a rate reduction would have saved the average homeowner $1.25 a month, amounting to a saving of $7.50 for the entire year of 2021.
One major benefit of approving a one-time capital credit, Ramsey said, is that it gets money into members’ pockets as quickly as possible.
parmijo@durangohearld.com
