GRE explains PCA increases
Oct 27, 2008

Rapid changes in energy generation and an unstable economy have hit our wholesale power supplier, Great River Energy, with additional large, unanticipated cost increases. ECE invited GRE President and CEO David Saggau to explain the changes that impact your bill.

As you know, Great River Energy is your electric cooperative's wholesale power provider. We generate the electricity you use at your home, farm or business. Your electric cooperative is one of our 28 member-owners.

This year, Great River Energy's wholesale power bill to your electric cooperative was 10 percent higher than expected. A good share of that increase has come in the last quarter of 2008, so you probably have seen—or will see—a surcharge on your electric bill.

Since about 60 percent of your electric bill is made up of wholesale power costs from Great River Energy, I wanted to take the opportunity to explain some of the reasons our costs have increased.

Loss of revenue
The single biggest factor affecting wholesale power costs this year has been a reduction in revenue from selling electricity to non-members. While we build power plants principally to serve our own membership, Great River Energy sells excess electricity to other utilities, which offsets a significant portion of our costs. In 2008, the market's need for excess energy was reduced dramatically, primarily due to cooler-than-normal weather this summer. This reduced our non-member revenues considerably.

Increased cost of fuel
We've all experienced higher fuel costs this year, whether it's gasoline, diesel fuel, natural gas or propane. These increasing fuel costs have also had an impact on our operations. All of our power plants are subject to fluctuations in the price of these fuels. While we had anticipated some increase in the cost of fuel this year, the magnitude of these increases was markedly beyond what we forecasted.

Power plant outage
The output of electricity from Coal Creek Station, our largest and lowest-cost power plant, was reduced due to a two-week outage caused by a mechanical failure earlier this year. The power we had to buy in the marketplace to replace that lost generation cost Great River Energy more than $8 million.

Impact of wind energy
We are adding resources to meet the state's renewable energy standard. Currently, we have more than 200 megawatts of wind energy on our system. The addition of wind energy is increasing our costs in two ways. First, adding wind energy requires other types of generation to back it up, because the wind doesn't always blow. This "overlapping" investment in generation drives up our costs.

Second, wind turbines are most productive at night and in the spring and fall months, when we need the energy the least. We sell excess energy into the market at these times, and the addition of wind to our portfolio drives down the prices we receive.

What about 2009?
For a variety of reasons, some of which are described above, electric utility costs are rising all across the country. We anticipate our wholesale power rate will increase substantially in 2009.

What is Great River Energy doing about costs?
We're aggressively managing those costs we can control, such as reducing capital expenditures and operation and maintenance (O&M) costs, while improving efficiencies throughout our system. Despite our increasing costs, Great River Energy is still a good value for its members. Our wholesale power costs are below the regional average cost for electricity, and we have the fifth lowest wholesale power rate of any generation and transmission cooperative in the country.

What can you do?
You can take advantage of your cooperative's energy efficiency and conservation programs. In addition, Great River Energy and your cooperative are offering moneysaving EnergyWise® off-peak electricity programs for your home. Watch for announcements of EnergyWise opportunities in the coming months.

We are grateful for our association with you, and we look forward to our continued partnership with your electric cooperative.