ECE response to letter from Heidi Hauge

Dear Ms. Hauge,

As your local electric cooperative, we appreciate when members ask questions, voice opinions on issues, and get involved in their member-owned business.

It is that same involvement and dedication that built East Central Energy (ECE), 76 years ago, when the areas we serve did not have access to electricity.

For-profit utilities refused to provide electricity to rural Americans because they could not make any money doing so.

A group of local farmers banded together and formed a cooperative to bring electricity to this area.

Today, ECE serves over 57,000 members in east central Minnesota and northwestern Wisconsin maintaining over 8,000 miles of power line within a 4,300 square mile service territory.

This means there are about seven ECE members to pay for and support the construction and maintenance of each mile of line.

Compare this to the 35 members per mile for investor-owned utilities and 47 members per mile for municipal utilities, and the need for higher rates is evident.

The rate you stated for ECE only reflected the summer rate and cost of basic service. Our energy rate is 13.8 cents per kWh for the months of June through August and 11.5 cents per kWh September through May.

The difficult decision to implement a new rate structure was made after an independent cost of service study, conducted by rate analysts, confirmed that the co-op would not recover enough revenue to meet its financial obligations.

The analysis also showed that ECE’s energy sales profile required a cost-based rate structure where fixed costs needed to be recovered through the cost of basic service rather than be blended into the energy charge as many of these expenses had been in the past.

The new cost-of-basic ensures that each member pays his/her fair share of fixed expenses and the need for some members to subsidize others is minimized.

Since our last rate adjustment in 2008, several factors have combined to drive up the costs of generating and distributing electricity. ECE is paying 21 percent more for purchased power, which makes up 60 percent of the co-op’s expense.

ECE has taken many actions internally to reduce controllable costs. Retirements have led to revamped job duties, resulting in labor force reduction of 6.3 percent since 2008.

Savings have been realized by using innovative programs such as summary billing and retread tires on trucks. The cooperative is holding off on investments in new technology and making full use of technology already installed.

As a rural cooperative, we understand the financial struggles members face. We know jobs are scarce, and the decline in the economy has created additional challenges in our service territory.

We are committed to work with any member having difficulty paying their electric bill with programs like Budget Billing and energy efficiency and conservation efforts. For more information, call 1-800-254-7944 or visit eastcentralenergy.com.

Jennifer Veeser

East Central Energy

Communications Manager

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