Q. Why is REC proposing to increase its rates?

After a careful review of the Co-op's costs of providing service and the future revenue projected from current rates, REC's Board has determined that we need to increase rates for delivering electricity. That way, we can maintain both our financial health and the high standard of service you have come to expect and deserve.

As a not-for-profit cooperative, REC is not focused on earning a profit for its shareholders. Instead, we are committed to providing reliable service at an affordable cost to you, our member-owners. As part of that, rates have to be at the proper level to cover our operating costs and make a reasonable margin to satisfy our lenders. And remember, any excess margins at the end of the year are allocated back to our members as Capital Credits.

Q. What has REC done to control costs and avoid increasing rates?

We realize every dollar matters to REC members. That's why we're always working to reduce expenses. We are using new technology and automation to improve the efficiency of our operations. This enables us to better serve you and control costs. We have reduced our workforce in recent years, not filling some jobs when employees retire or leave the co-op for other reasons.

Through the 1990s and early 2000s, REC was able to absorb rising costs of equipment and labor by connecting new homes and businesses. That resulted in REC selling more electricity. For many years, growth in connections and the use of electricity was steady. As the economy slowed, however, so did REC’s growth.

To spur growth and further delay the need to increase rates, in 2010, REC grew its membership by 50 percent by welcoming former customers of Allegheny Power. The economies of scale of this expansion proved to be very beneficial to all of REC's members, since there were now many more residential and business members to help pay for REC’s fixed operating costs.

For example, overnight we had approximately 50,000 more members to help pay for the fixed costs of 24/7 dispatchers and computer systems.

This is an example of how REC has carefully balanced costs and revenues to delay the need for an overall rate increase. However, the bottom line it is this - your Cooperative's costs to safely deliver reliable electric service have steadily increased for decades. For example, the cost of poles, transformers and power lines have increased by 46 percent in the past 25 years.

For more than a year, the cost of wholesale power that REC buys and delivers to you has been decreasing. In addition, with your help in programs like our Smart Response AC Switch Program - and through the purchase of 5 percent of your power needs from an alternate supplier - we have done a lot to further reduce the overall cost of wholesale power purchases and save you money.

REC has been passing these savings to you by reducing the power cost adjustment on your bills.

Q. Instead of passing wholesale power savings on to me along the way, why didn't REC keep that money to avoid having to increase rates now?

A. State regulations require REC to pass through directly to members the wholesale costs of buying the electricity members use on a dollar-for-dollar basis. That means any reduction in costs must be passed on to you, our members. From your perspective as a member, that means the money you pay REC for the electricity itself cannot be used to help cover the rising costs of delivering that electricity to you.

Q. How will my electric bill be affected?

It covers REC's fixed costs. These are the same regardless of how much electricity you use. They include equipment like the transformer in your yard and the meter on your home, and they also important support activities like billing, payment options, and our member services center for when you have a need to call us.

The Cooperative is also proposing seasonal rates for electricity supply service. REC operates in a multi-state wholesale power market, where the peak amount of electricity used during a few days in the summer is a significant component of the cost of electricity year round.

Since summer electricity use drives the wholesale cost of electricity, we are proposing retail rates that reflect that cost by having slightly higher rates for electricity usage in the summer months (June through September) and slightly lower rates in the non-summer months (October through May).

Q. What are the benefits of seasonal rates?

A. One of the benefits of seasonal rates is that they send a clear price signal to consumers, encouraging them to use power wisely when the demand for electricity is at its highest. Members who choose to conserve and use less electricity when the price is higher (by, for example, raising the temperature on their thermostat a couple of degrees) will save money for REC, and that savings will be directly passed through to the member who took action.

A higher summer price will also provide a financial incentive for members to justify decisions, such as installing a higher efficiency air conditioner when the old one fails. In that example, the higher efficiency model will save the member even more money.

Finally, seasonal rates help ensure that members who have high demand in the summer appropriately pay for the expense they create, rather than that expense being paid for by all the other members.

Q. When will the rate adjustment take place?

A. REC submitted a formal application to modify its rates with the Virginia State Corporation Commission (SCC) on May 23, 2017. The SCC is an independent agency of the Commonwealth that is charged with the responsibility of regulating public utilities that provide electric, natural gas and water to consumers in Virginia. The SCC will undertake a lengthy process to evaluate our proposed rate changes. The Commission will ultimately determine whether REC's proposed rates are "just and reasonable."

It is anticipated that any changes in REC's rates that are approved by the SCC will occur in early 2018.

Q. What is the State Corporation Commission's process for reviewing the rate application?

A. The SCC’s process for reviewing a rate increase application is extensive and time-consuming.

It will begin with an in-depth audit of REC’s books and records by the SCC's accounting staff. Utility rate specialists on the SCC’s staff will evaluate the Co-op's proposal to change some of its rate structures, including the increase to the residential Access Charge and the introduction of the seasonal rates. The Commission's Staff will report on its findings and recommendations.

The Office of the Attorney General, which functions as the Consumer Advocate in the Commonwealth, will be an active participant in the process. The SCC will also invite any members who are interested to provide comments in writing or in person at a designated time and place. The Commission will hold a formal public hearing to receive evidence and hear testimony on REC's proposals.

Soon - probably within a month of the application being filed - the SCC will establish a schedule for the proceeding, including the date of the public hearing. The SCC's schedule will also direct the Co-op to notify its members of the proposed rate changes, as well as the timeline and milestones for the process.

The SCC's process typically takes 8 to 9 months to complete. That means any approved change in rates would likely take effect in the first quarter of 2018.

Q. How can I get more information?

A. REC will provide additional details about the planned changes and will inform members of the SCC’s review schedule through Cooperative Living magazine, community meetings and at www.myrec.coop/rates. REC members may send questions to the Cooperative on that web page or may call 1-800-552-3904.

Rate Adjustment Timeline

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