8 May 2017 — 0847 mdt

Flathead Electric rate increases for 2010–2017 run ahead of inflation

My bill from the Flathead Electric Cooperative arrived in my email traffic over the weekend, together with a not unexpected, but still not welcome, announcement that residential rates are going up.

FEC’s residential rates increase annually by a few percent. Each increase seems small in isolation, but over time they add up. The table below displays the rates for 2010 through 2017, both in current dollars and 2017 dollars. For the multi-year period, the price is increasing faster than inflation.

FEC’s base charge covers some, but not all, of FEC’s overhead for administration and distribution, and is applied to bills just as a flat tax is applied to income. Widow Murphy, living in a studio apartment on $500 per month in Social Security, pays the same base charge as hedge fund king Charlie Goldboots, who lives in a $10 million “cottage” 10 miles up the road in the mountains.

Widow Murphy uses 500 kilowatt hours of electricity a month. Her monthly bill is $55.66, and her true cost per kilowatt hour is $0.11132. Charlie Goldboots uses 5,000 kilowatt hours of electricity a month. His monthly bill is $468.76, and his true cost per kilowatt hour is $0.093742.

Thanks to FEC’s whopping base charge, Widow Murphy’s true cost per kilowatt hour is 18.7 percent higher than Charlie Goldboot’s despite his being an energy hog whose fixed cost of service is a lot higher than Widow Murphy’s. And Charlie is harder on the environment.

If FEC wants to be fair to Widow Murphy — and right now, FEC clearly does not — it will lower that base charge to five dollars a month or less, and recover the costs of administration and distribution by adjusting the per kWhr rates.