A kilowatt-hour (kWh) is the standard unit of measure for electricity use and is equal to 1,000 watt-hours. For example, a 100-watt light bulb running for one hour uses one-tenth of a kWh. If electricity costs 10 cents per kWh, it costs one cent per hour to operate that bulb.
Below is an explanation of the four primary factors that influence your electric rate.
Power Costs
• Wholesale energy costs are for the fuels used to generate power, such as coal, natural gas, and renewable resources like wind and solar energy. A global increase in competition for these fuels and other materials is responsible for increasing the energy portion of wholesale power costs.
• Wholesale capacity costs are the fixed costs incurred to provide service associated with the generation facilities that produce power. These costs include depreciation, maintenance and costs associated with meeting environmental regulations.
Distribution Demand Related Operating Costs
• These are costs incurred by TCEC to provide facilities that are sufficient in size to provide the power to all members. Facilities such as substations, overhead and underground line and transformers are built to reliably serve the maximum load required. Operations and maintenance expenses, depreciation and interest on long-term debt are the major components of this cost.
Distribution Member Related Operating Costs
• Certain components of the cost of providing service are related to TCEC connecting the member to the grid and making the service available. These are costs that are incurred to serve all members regardless of whether they use any energy. Costs associated with the meter, the service line, the minimum size poles and wires to serve, billing and member service related costs are included in this cost.
Margins
• When revenue exceeds expenses, a cooperative has margins. TCEC designs its rates to produce a margin sufficient to meet the requirements of our lenders and maintain financial integrity. As a not-for-profit electric cooperative owned by its members, TCEC annually allocates margins to the members based on revenue. The cumulative margins, also known as patronage capital, provide TCEC with a source of cash for plant investment and operating capital. Periodically, the TCEC board of trustees authorizes a return of patronage capital to members, called capital credits. This assignment of margins to members and payment of capital credits is a cornerstone of being a cooperative.
Service availability charge
• A fixed fee that recovers a portion of the distribution member related costs. This charge is intended to recover costs associated with metering, poles, wires, and transformers required to make service available. The cooperative’s actual distribution member related cost is currently higher than the service availability charge. The remainder of the distribution member related cost is recovered in the energy charge.
Energy charge
• A charge billed on a fixed rate per kilowatt-hour (kWh) based on the amount of electricity you use. The rate per kWh is defined by service type in the Rules and Regulations. The energy charge recovers the wholesale energy related costs, a portion of the wholesale demand, the distribution demand related costs and a portion of the distribution member related costs.
Demand charge
• A charge billed on a fixed rate per kilowatt (kW) based on the amount of electricity you use. The rate per kW is defined by service type in the Rules and Regulations and Tariffs. The demand charge recovers a portion of the demand related wholesale costs and a portion of the distribution demand related costs.
Power cost adjustment (PCA)
• A portion of the wholesale demand and energy costs are included in the energy charge and demand charge. The actual power cost from our power supplier fluctuates periodically due to changes in power supply costs and fuel costs. The PCA provides the cooperative a means to recover or return fluctuations in the cost of power. This charge is applied as a charge or a credit on a per kWh basis.
February 2021 Weather Event Rider
• A rate rider is a temporary charge added to your monthly bill. Beginning in August 2021, members began to see a line item on their electric bill for the February 2021 Weather Event Rider. The cooperative incurred about $35 million in power supply costs during February’s extremely cold weather. The weather event rider is intended to recover that amount plus interest. To lessen the financial burden on members, TCEC extended the rider over approximately 10 years. Read more about the weather event in the August 2021 Member Matters article from CEO Zac Perkins.
Gross Receipts Tax
• The state gross receipts tax is paid by electric cooperatives in Oklahoma based on the amount of energy sold. It is currently two percent. One advantage of being served by a cooperative is that the gross receipts tax goes back to the local school districts based on miles of electric line in each district.
Franchise Tax
• Municipalities charge TCEC a franchise fee for the use of city streets and public ways to provide electric service to the residents and businesses within the city’s limits. TCEC collects this fee as a passthrough charge on electric bills for members with electric service in those towns. Each municipality sets its own franchise tax percentage.