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Electric rates jolts up - ALP, REA plan rate increases

Douglas County homeowners can partly blame surging energy costs for their higher electricity bills this year.

With wholesale power costs up due to rising demand and tightening supplies, local non-profit utilities Alexandria Light and Power and Runestone Electric Association are raising their rates by 10 percent in 2009. REA's rate increase took effect March 1.

Both companies are having to pay more these days for the power they receive, which is causing most of the rate hike, officials say, although a portion is due to higher operational costs.

"For all our costs, 82 percent goes to wholesale power costs," said Al Crowser, ALP general manager. "We don't have much to control."

REA spends 56 percent of its budget on purchasing power for its customers. The utility estimates 5.5 percent of its 2009 rate increase is from higher energy prices, with added distribution costs responsible for 4.5 percent.

The last time REA raised rates was in 2006 when it increased its annual fixed charge from $11 to $17, said Jim Hultman, REA staff assistant.

Hultman said higher demand is at the heart of the recent rate increase.

REA sold roughly 8 million more kilowatt-hours of electricity in 2008 - 4 percent more than it did in 2007 while signing up 178 new customers.

"We're not seeing a huge influx of new customers," Hultman said, "but we are seeing an increase in energy sales." Some of those increased sales are related to weather.

"We've had a couple of really nasty, cold winters [lately]," Hultman said.

REA measured 1,844 "Heating Degree" days through the first 29 days of this past January, compared to 1,789 in 2008 and 1,534 in 2007.

ALP, which is raising its rates by 10 percent for the second consecutive year in 2009, has seen a similar spike in demand for electricity in recent years, according to Crowser.

"Not only have we hooked up a lot more customers in Alexandria," he said, "but the customers we [already] have, [they] have been starting to use a lot more."

Energy usage among ALP customers climbed 28 percent from 2001 to 2008, Crowser said, as people have purchased more electronic appliances, which zap up more energy, and people use those appliances more frequently.

Air conditioning is more common today than it was in the past, Crowser said, as are other energy-intensive devices such as big-screen TVs, DVD players, video-game systems and computers. "That has been huge," he said.

People's appetites for energy are increasing, Hultman and Crowser said - a trend they both expect to continue, along with higher rates.

The problem, according to Crowser, is supply hasn't kept pace. There hasn't been a large-scale coal power plant built in the region since the 1970s, he said, and the growth in energy supplies has been in more expensive natural gas and wind technology.

Crowser said a proposed South Dakota coal plant, known as Big Stone II, which would serve ALP customers, could help slow the rise of energy costs in the future, but he's not sure it will reverse the trend. "We have provided a service that has been very reliable and pretty inexpensive [in the past]," he said. "But it is getting more expensive, and when it is getting more expensive it is going to start to hit people.

"If they want to pay less, they've got to use less."