Study Shows Increase Needed

The recent cost-of-service study shows the cooperative needs to increase revenue by $2.5 million to meet financial obligations. It is the first time in over a decade the cost of electricity per kilowatt-hour (kWh) will be increased. The proposed amount represents a 5% increase. 

During the 2024 annual meeting in Topeka, FreeState CEO Chris Parr spoke about the need to review rates. He shared that FreeState is working with Power System Engineering (PSE) to conduct a cost-of-service study for a comprehensive look at the cooperative’s rates and to determine if FreeState could continue meeting its financial obligations. 

The study, presented to the FreeState Board of Trustees in August, showed the need to increase revenue by $2.5 million. 

“It seems like a huge number,” Parr said. “But that number is reflective of the changes in the energy industry and economic environment we are currently in.” 

Parr said as the cost of producing energy continues to increase, a distribution cooperative, like FreeState, has little control over what price the cooperative pays per kilowatt-hour. 

“We have been able to maintain the price members pay per kilowatt-hour for over a decade,” Parr said. “We made a commitment to our members to keep rates stable for five years after the 2017 consolidation and we’ve exceeded that. We have tightened our belts these past three years as we saw these increases impact our bottom line, but we’ve held off rate increases as long as we can.” 

“I want members to know that this is not doom and gloom, by any means,” Parr said. “We are in a good financial position, but we have to look forward and we are at the point where changes are needed to continue that way.” 

The cooperative adjusted the electric service charge (ESC) in 2021. This is a fixed charge every member pays to help recoup the costs of providing power. The ESC has helped revenue hold steady, but for the long-term financial future of the cooperative, it is time to make a rate adjustment. 

“Not only is the cost to buy power increasing, but the cost of providing power is going up, too,” added Parr. 

Prices of materials purchased by the cooperative have increased significantly since supply chain hiccups caused long waits for items needed for day-to-day operations. Those prices have stabilized, but they are still higher than they were even last year. These are costs that the co-op cannot absorb any longer. 

“These are items needed to make sure members have power. Necessities, not extras,” Parr said. “These are items needed to operate. This also gives us an opportunity to look at modernizing our rates, and we are looking at what we can bring to the table for members. Can we provide more control, choice and convenience?” 

SO, HOW DO WE GET MORE REVENUE? 

While the cost per kilowatt-hour is increasing to help cover the cost of rising wholesale costs, we will also make an adjustment to our service charge, which is used to recoup the costs to bring power to your service address. These adjustments will be part of the revenue increase. 

Another adjustment will be billing for demand. Demand billing provides equity among members ensuring everyone is paying their share to minimize subsidies of rate classes. This is new for our residential members. We will include more information about demand billing in our November issue of Kansas Country Living. We will break down the decision to propose a threepart rate and explain how demand billing gives members more control over how you use energy moving forward. 

In the December issue, you can expect information on specific rate changes that will emphasize how members will have more control, choice and convenience with the modern rate structure. 

There will be no changes to rates until after the board of trustees holds a special meeting on Jan. 27, 2025. The cooperative will also be holding member meetings to get feedback and go through step-by-step what the rate change means for them on a meter-by-meter level. At our member meetings, members will have the chance to have accounts analyzed to understand exactly how increases will look in 2025 individually. 

“There is never a good time to make changes to rates,” Parr said. “This is one of the most difficult decisions the board will face. The decision is based on our current economic environment and making sure that FreeState remains in a strong financial position and able to provide safe and reliable power. We value each of our members, and we thank you for your support.” 

For more information, visit www.freestate.coop/rates. If you have questions about rates, please contact our office.