Your Power Supply Costs Have Dropped
Published
by Terry Rubenthaler on Friday, November 1, 2024
in
Electric
Recently, I was driving to our Tecumseh office from my home in Niles, when I noticed gasoline prices ranging from $2.88/gallon to $3.39/gallon. I have always wondered how there can be such a disparity in a small area. As gasoline consumers, we always make it a game to try and find
the best price in the area and brag to our friends when we find it cheaper. At MEC, we work hard to avoid price volatility and brag about price stability. It’s what sets us apart.
Similar to gasoline, electricity prices fluctuate regularly. The price can change throughout the day, sometimes doubling or tripling from morning to afternoon. Energy bought and sold during peak hours is more expensive than when the demand is lower. For example, electricity generally costs more at 6 p.m. than it does at 2 a.m.
How do we keep our rates stable when the wholesale market changes this much? Along with our power suppliers, we look at long-term average pricing. Doing this helps us avoid a crisis like the one in Texas in 2021, where customers suddenly found themselves with electric bills in the thousands of dollars. When an unexpected cold snap hit the deep south and many of the wind and natural gas generators were suddenly not available, the price for remaining available power skyrocketed due to increased demand and limited supply. Customers in Texas ended up footing the bill in a big way because they weren’t benefitting from long-term average pricing; they were paying the actual market rate.
MEC does not generate power or make margins on it. Instead, we purchase all our electricity from either Wolverine Power Cooperative or Buckeye Power and pass those costs directly onto our electric customers. Every five to seven years, we do a cost-of-service study and forecast our power supply costs, and we then adjust those forecasted estimates to the actual power supply costs using the Power Cost Adjustment (PCA). The PCA is itemized on your monthly bill, and following this process gives MEC an important tool in keeping your rates stable.
I am pleased to announce that we are lowering the PCA starting in October. Wolverine Power has natural gas generation in Gaylord, Michigan, that has been running more efficiently and longer than originally planned. Combined with unusually low natural gas prices, our power suppliers have provided the opportunity for MEC to drop the PCA charge from $.01014/kWh to $.004/ kWh. What does this mean for your pocketbook? A customer who used 1,200 kWh in September 2024 would have paid $12.27 for the PCA. In October, the cost was $4.88. This is about a 4% drop in the average overall bill. Based on our power supply budget for 2025, it looks like this charge will stay lower through the end of next year.
Price stability is not just something we dream about; it is something we are dedicated to achieving every day. As you drive by your neighborhood gas stations today stressing over the latest price changes, I hope you can breathe a sigh of relief knowing that your team at MEC ensures that power supply costs continue their legacy of stability.