That is where the transmission cost portion of your bill comes from. As
with energy purchased and demand energy, transmission costs are based
on the kilowatts that Vinton uses. The more energy that Vinton uses,
the higher the transmission costs on each bill. Transmission &
Demand costs account for about 38% of our wholesale energy costs. Since
ITC Midwest acquired the transmission system from Alliant Energy in
December of 2007, our transmission cost per kilowatt has increased
almost 3 fold. ITC Midwest charges more than other transmission
companies like Mid-American but we don't have any choice in using their
transmission system to get power delivered to Vinton.
Your electric bill for residential customers contains the following
entries on it: RE RESIDENTIAL, RE ENERGY COST ADJ, SL SECURITY LIGHT
I will start with an explanation about how security light rental
charges are arrived at. The monthly rental rate is based on the
following costs incurred by the utility to provide security light
Energy (electricity) used to light the security light. Energy costs are over 80 percent of rental costs.
New hardware costs such as the supporting arm, bulb, fixture and photo cell.
Maintenance costs including deployment of trucks and manpower to
troubleshoot and fix ailing lights or to install new units at customer
To explain the other two portions of your electric bill some background
information is necessary. VMEU lowered the electric rates back in 2001
after it was determined that the lower wholesale costs of a new
purchase power contract were resulting in slightly elevated revenues.
The contract for the "cheap" power ended December 31, 2004. A new 5
year contract took over. Each year of the contract provided for
increases in the cost of energy and demand which continues with further
contracts into 2016. Residential and commercial customers are not
familiar with demand energy on the bill but industrial customers are.
Residential and commercial customers are not familiar with demand
energy on the bill but industrial customers are. However, residential
and commercial customers do contribute to the demand energy charges.
Check my explanation of demand energy above to understand this. When
the higher rates went into effect in 2005 the utility board opted to
cover the increases from revenues acquired from the "cheap" power for
almost all of 2005. Rate changes require advertising of the changes
along with changing the rate literature that is published. To delay a
full blown rate change the utility board decided to go back to using an
energy cost adjustment (ECA) to control the spikes in power costs. A
formula was created that used the "cheap" wholesale base cost to start
the ECA at 0 cents. Then costs that changed on a monthly basis were
added to the ECA formula to arrive at a new ECA each month. Basically
the published rates were to cover normal overhead like labor, material,
equipment and other costs. The ECA is used to cover wholesale energy
cost increases (above 2001 level) of natural gas, lubrication oil
and diesel fuel used to heat the plant and generate power. Actual rate
increases had to be initiated in 2009 and 2010 to cover increased
costs of material, labor and equipment.
While transmission costs
continue to rise from ITC, wholesale energy costs have stabilized on
our purchase power contracts through 2019.