Why the need to change?

The utility industry historically blended all costs into a customer’s energy charge, lumping a utility’s fixed expenses, such as operations, inventory, maintenance, repair and administration overhead, with the kilowatt-hour charge.

This approach created an inaccurate perception among members that the co-op’s services were defined solely by how much electricity they used. While a utility’s expense to buy energy for its members fluctuates based on weather and the energy markets, its fixed costs remain more stable.

Over time, the practice proved untenable, and it became necessary to separate or decouple fixed costs from electricity use because fixed costs began to exceed revenues. Various factors contributed to this imbalance.

The chief driver of electricity demand is the weather. It has become more unpredictable and extreme, creating strong revenue fluctuations and challenging business management. The electric industry has rapidly evolved, with emerging technologies affording customers multiple ways to reduce their energy use through efficiency and rooftop solar. CEC applauds and encourages members’ efforts to reduce their energy use. As a not-for-profit, however, CEC must recover its fixed costs equitably from all members.

CEC began to address the issue in 1978, adding a customer charge—later named the facilities charge—to stabilize revenues. While the facilities charge gradually increased, it did not keep pace as CEC’s fixed costs significantly exceeded revenues, putting the co-op’s rates out of balance.

In 2016, a rate design advisory committee, comprised of volunteer co-op members representing all customer classes, convened to devise a solution to balance revenue collection equitably.

The board of directors adopted their recommendation, bringing more fairness and balance among the different rates —members paying for their energy use and equitable share in operating the utility.