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Factors That Impact Electricity Prices

When asked what impacts electricity prices, many utilities talk about how the daily cost of living seems to have increased across the board.

Just as inflation has impacted everything from the price of gasoline to the price of eggs, costs for the fuels required to produce electricity have also risen. This is a timely topic, so I wanted to help explain some of the factors that impact electricity prices.

While there is no short answer, there are a few key elements that impact electricity prices and rates. Some of these factors Harrison County Rural Electric Cooperative can manage, some of them you can influence and other factors are beyond the cooperative’s control. So, let me break it down.

There are three primary parts to your monthly electric bill: a service charge, an energy consumption/kWh charge and a Power Cost Adjustment (PCA). To understand your total energy costs and what impacts your bill, lets unpack one piece at a time.

The first is a fixed monthly service charge, which covers the costs associated with providing electricity to your home. This includes equipment, materials, labor, and operating costs necessary to serve each meter in Harrison County REC’s service territory, regardless of the amount of energy used. In order to ensure the reliable service you expect and deserve, we must maintain the local system, including power lines, substations and other necessary equipment. Like many other businesses, we’ve experienced supply chain issues and steep cost increases for some of our basic equipment. For example, the cost for a distribution pad transformer (which is stored a large green metal box that sits on a cement pad) increased from $1,207 before the Covid-19 pandemic, to $1,605 in 2021 with another jump to $2,505 this year and wait times to receive this essential equipment can range between six months to over a year. Because we are a not-for-profit cooperative, some of these expenses must be passed on to our members. I should note that the service charge is the same for everyone and the costs are shared equally across the membership.

Another component of your monthly bill is the kWh charge, which covers how much energy you consume. You’ve likely noticed the amount of energy you use can vary from month to month and is typically impacted by extreme temperatures. When temperatures soar or dip, your cooling and heating equipment run longer, which increases your home energy use. Regardless, energy consumption is an area that you have some control over, and you can lower your monthly bill by actively reducing energy use.

The last component of your bill is the PCA or the Power Cost Adjustment, which is the same amount for all co-op members. When the PCA is a positive amount, that means that it costs more money to provide power to our members and that cost is being accounted for through the PCA. This can happen because of higher costs to maintain reliability and security of electric infrastructure that are incurred by our wholesale provider, which means the power that Harrison County REC purchases from our generation and transmission cooperative is more expensive. The PCA covers cost fluctuations without having to continually restructure electricity rates.

I hope this information sheds light on some of the factors that impact electricity prices. While we can’t control the weather or the rising costs, please know Harrison County Rural Electric Cooperative is doing everything possible to safely provide affordable and reliable power to our members.

Harrison County REC is here to help you, too. Contact our office today at 712.647.2727 if you have questions about your energy bill or for advice on how to save energy at home.

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