Cost of service/rate study

At Piedmont Electric, we work hard every day to provide you with the best service possible while also striving to keep rates low.

However, just like a gallon of milk costs more than it did a few years ago, costs to deliver electricity creep up over time as well. That’s why every few years we have a consultant conduct a cost of service study to ensure that our co-op’s budget reflects the current cost of things like materials, labor and the price of power.

Piedmont Electric has not had to change our general rate structure since 2014, thanks in part to aggressive cost control and your participation in our energy-saving programs such as Beat the Peak. However, periodic review is important, which is why we are currently conducting a cost of service study. Let’s discuss some of the common questions.

What is a cost of service study?

A cost of service study is a review of a utility’s rates to ensure that the rates the utility charges will continue to provide enough revenue for the utility to cover its expenses and meet our lenders’ margin requirements. If your cooperative is unable to cover its expenses, we would have to cut back on things like maintenance to our system, which would lead to more outages.

The cost of service study also ensures that the rates charged are assigned to the source of those expenses.

For example, if the cooperative has large expenses to provide service to an industrial member, then the rates that are charged to that member must recover the cost of serving that member.

If the rates charged to the industrial member did not cover the costs, then other members would have to help bear those costs. Piedmont Electric wants to avoid this situation and ensure all members are billed fairly. Therefore, the rate charged to the industrial members is different than that of a residential member to ensure the cost of serving the industrial member is covered.

What does Piedmont Electric do with any revenue they collect above expenses?

Since Piedmont Electric is a not-for-profit cooperative, our rates cover the cost of delivering power to our members. Any additional revenue is eventually returned to our members in the form of capital credits as we are owned by members, not outside investors.

We have not changed our general rate structure since 2014

Does a cost of service study mean rates will increase?

Not necessarily. While costs are gradually rising over time, a cost of service study could show that expenses for some rate classes have grown faster than others. As a result, those rate classes could see a change.

If rates change, when would they take effect?

Any changes would likely take effect with your May 2021 bill and we would notify you in the Carolina Country magazine and on our website. Each year, Piedmont Electric adjusts riders and fees starting in May. These charges pay for additional costs incurred by the cooperative which can change quickly from year-to-year and are outside of the cooperative’s control, such as the storm damage rider or the energy efficiency and renewable energy riders.

Be on the lookout for more information about issues impacting rates, how you can help us keep rates low and more in the coming months.