December 2005

The Perfect Energy Storm

WEMC doing all it can to hold the line on electricity costs

“It couldn't have been any worse.”

That's how Walton EMC CEO Ronnie Lee describes the events leading up to this year's skyrocketing energy costs.

As prices at the pump are falling, the same is not true with energy sources used to generate electricity. “Coal, used to produce most electricity in Georgia, went up when all other energy sources went up,” said Lee, “but unlike gasoline, the price of coal has not come back down.”

Neither has natural gas, used to meet some of Georgia's electrical demand during peak use periods.

As if rising energy prices weren't enough, unexpected outages hit key Georgia electric generating plants. This forced Walton EMC to turn to the spot electricity market to make up the deficit.

“What we had to buy on the spot markets was more expensive than what the plants could have generated. This just compounded the problem,” said Lee.

After all the energy mayhem in August caused by Hurricane Katrina, the weather in our area was significantly warmer than normal. “September's temperatures were 35 percent higher than normal and October was the hottest in 20 years,” said Howard Turner, WEMC director of marketing and member services.  “That means everyone's air conditioner ran more.”

The co-op has been able to absorb a huge amount of the wholesale increase without passing it on to customer-owners.  “Because of our cooperative business model, we've been able to take the hit,” said Lee.  “We feel our customer-owners would rather the co-op make no margins this year in order to keep rates low. We can do this for 2005 and still meet our financial obligations.”

“We can't do that forever. But if energy costs will moderate next year, I think we'll be okay,” added Lee.

Compared to other Georgia electric utilities, Walton EMC's response in relation to the impact on its customer-owners is modest.

Through October, WEMC had spent $20 million more than budgeted for wholesale power, a whopping 30 percent increase over last year. The cooperative was left with no choice but to add a power cost adjustment beginning with September bills.

Several other utilities have gone as far as raising rates in response to high wholesale energy costs.   Most have at least added temporary riders to electricity bills to cope.

There is good news.   WEMC does not project having to raise rates in 2006.   And at only $7 per 1,000 kilowatt-hours, our power cost adjustment is one-third that of many other electricity providers.

So what's to come?  “We'll see a greater emphasis on lower-cost methods of generating electricity, like expansion of nuclear plants in Georgia,” said Lee.

Whatever happens, feel secure that Walton EMC will stick to its basic cooperative values. That means looking out for your best interest.

More Information: Energy Information Administration

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