Opalco Board Sets Temporary Revenue Recovery Add-On

Members Will Pay Monthly Add-On To Recover Under-Charged Bill Amounts

At the June 18 board meeting on Lopez, the Orcas Power & Light Cooperative Board approved a temporary revenue recovery add-on to make up for the current cost-of-service gap and projected revenue shortfall through the end of 2015. The add-on will be applied to all member bills beginning in July, 2015.

“Members have not been paying their full share,” explained Foster Hildreth, General Manager. “They’ve been undercharged because our rates have not collected the true cost of service.”

Residential members will pay an additional one cent per kilowatt hour (kWh) and commercial members will pay just more than a half-cent per kWh. The difference between the residential and commercial add-on is due to the cost-of-service spread: commercial usage is less than 25% of our total system load. The increase will average $8.43 for a residential member with average usage.

“However, the situation is better than we thought,” said Hildreth. “Our first quarter financials came in with less shortfall than anticipated due to lower power purchases from BPA and savings from cutting expenses.” Hildreth reported to the Board that kilowatt-hour sales were down 6.4% through May. The total shortfall projected by year end is $661,000.

The revenue recovery add-on was calculated using the total projected shortfall divided by projected energy sales. The methodology is detailed in a report from EES Consulting in the June 2015 board materials, available at www.opalco.com. The Board has mandated that the shortfall be resolved by the end of the year. The add-on will be discontinued if the shortfall is resolved before the end of the year and no further shortfall is projected.

In addition to keeping a stable margin, this corrective action is required to remain compliant with our federal funder, USDA/Rural Utilities Service (RUS). RUS works closely with utilities to keep financial indicators healthy using a three-year window for review. OPALCO is compliant at this time. More detail about OPALCO’s corrective action plan and financial standing with RUS is available online in the June 2015 board materials.

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