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 rates for delivering electricity need to increase. That way, REC can maintain 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, all 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 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.

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.

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 or increase in power 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?

The typical residential member using 1,000 kilowatt hours (kWh) per month will see an increase of approximately $3 per month for eight months, and an additional $6 increase during the summer months.

A major part of this rate change is an increase in the Access Charge. It covers REC's fixed costs. These are the same regardless of how much electricity you use. The costs include equipment like the transformer in your yard and the meter on your home, and critical functions like 24/7 dispatch, billing, payment options, and our member services center for when you have a need to call us.

The Cooperative is also implementing 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, retail rates are changing to reflect that cost by having slightly higher rates for electricity usage above 800 kWh per month 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 summer 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 air conditioner 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 electricity, natural gas and water to consumers in Virginia. The SCC undertook a lengthy process to evaluate our proposed rate changes. Final approval was received on Jan. 9, 2018.

The changes in REC's rates will occur with bills issued on or after March 1, 2018, meaning the new rates will apply to the electricity used in the 30 days prior to your March Bill.

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 began 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 evaluated the Co-op's proposal to change some of its rates, including the increase to the residential Access Charge and the introduction of the seasonal rates. The Commission's Staff then reported on its findings and recommendations.

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

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.