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Friday, July 11, 2014

Consumers will continue to see ice storm effects on bills

Thursday, March 12, 2009

North Arkansas Electric Cooperative (NAEC) members may have noticed their bill for February was a bit higher than expected.

The note tucked in with member's bills reads:

"While your kWh cost reflects your actual kWh usage, the Basic Service charge on your bill is based on fixed costs such as the cost of materials for the power lines, meters and transformers, taxes on property, interest on borrowed money, maintenance and billing. These costs are ongoing, regardless of kWh usage.

"Outages like the recent ice storm are beyond our control. Under Arkansas law, we are required to charge members in accordance with the rate schedules we have filed with the Arkansas Public Service Commission. To do otherwise could result in substantial fines to NAEC. The Basic Service charge is a part of the rate schedules on file with the Arkansas Public Service Commission and, therefore, cannot be suspended.

"Thank you to all of the members who contributed to restoring power, whether through donation of food, time or words of encouragement. We appreciate everyone's patience and cooperation during this trying time."

NAEC estimates the total cost of repairs from the storm damage might go beyond $32 million. They believe about 3,200 poles were either broken or downed. Even though the power is back on for NAEC members, the co-op estimates it might take anywhere from 12 to 14 months to do repairs and clean up of the whole system.

There are many NAEC members who are disgruntled at having to pay $40 to $60 more on their electric bill for February. Some people were without power for as much as 20 days due to the ice storm.

"We certainly regret the inconvenience of the system being down as long as 19 days for some people," NAEC Chief Executive Officer Mel Coleman said.

"The charge is a normal and typical charge that any electric utility uses to recover," Coleman said. He said it is called a Fixed Disaster Recovery Charge. Coleman said the charge is a fixed charge set by the Arkansas Public Service Commission (APSC) that the co-op has to charge its members.

Coleman said even though there may be a power outage and no kilo-watt hours are used, there is still a fixed charge during the time of the outage that members have to pay.

"The fixed distribution charge is a component of the electric bill designed to help recover those costs associated with the costs of delivery of power to all members, regardless of their kWh usage. Fixed costs include poles, lines, transformers, equipment and personnel," Coleman said. "Basically, all costs associated with the services provided by the cooperative. These costs are ongoing and the responsibility of the cooperative and its members, regardless of the amount of kWh sales. The fixed charge is a tariff filed with APSC."

"(APSC) are the ones who developed the language in the bill insert," Coleman said. He said the co-op is following the rules and standards set by the APSC, but NAEC has not made any filings with them to defer the costs related to the ice storm.

Coleman explained that the co-op is not like many utility companies. "We are an at-cost not-for-profit organization," Coleman said. The co-op has no stockholders, which makes the members owners who share in any expenses incurred by NAEC, he said.

Coleman said even though the Federal Emergency Management Agency (FEMA) will reimburse NAEC up to 75 percent of the cost of damages and the state will give back 12.5 percent, NAEC will still have another 12.5 percent to go on the total cost of the damages, which will cost NAEC about $4 to $4.5 million.

Added on the cost of damages NAEC will have to pay, Coleman said, is the cost to maintain the system and the $1.5 million in lost revenue incurred during the power outages.

"We're looking at every possibility (of paying the 12.5 percent of damages)," Coleman said. "We're working with the APSC. We will have a recovery mechanism in place for FEMA."

Coleman said it could take up to a year for FEMA to reimburse NAEC. However, "We are fortunate to have FEMA and the state of Arkansas anticipate as much as $25 to $30 million to be reimbursed," Coleman said. He said if it was not possible for NAEC to get any reimbursements, the co-op and its members would have to absorb the total cost of the ice storm.

"I would like to emphasize that we regret that anyone was without power for even one day," Coleman said. "We will try to lessen the (monetary) impact on our members in every way possible."

"The ice storm was an unforgettable, catastrophic event of historic proportions," Coleman said. "While it was a trying time for both our employees and our members, I feel like we did an outstanding job rebuilding a system that took 70 years to build. The seemingly impossible task took less than three weeks to complete. We will continue to work to the best of our ability to minimize the costs to all the members of NAEC."



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