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August 2023 CEO Message

Factors that Impact Electricity Prices

I was recently asked by a member about what impacts electricity prices. We talked about how the daily cost of living seems to have increased across the board.

Just as inflation has impacted everything from the price of gasoline to the price of eggs, costs for the fuels required to produce electricity have also risen. This is a timely topic, so I wanted to help explain some of the factors that impact electricity prices (and energy bills) in this month’s newsletter.

While there is no short answer, there are a few key elements that impact electricity prices and rates. Some of these factors Orange County REMC can manage, some of them you can impact and other factors are beyond our control. So, let me break it down.

There are three primary parts to your monthly electric bill: a consumer service charge, a standard service energy (per KwH) and a Wholesale Power Cost Tracker (PCT). To understand your total energy costs and what impacts your bill, let’s unpack one piece at a time.

The first is a fixed monthly service consumer charge, which covers the costs associated with providing electricity to your home. This includes equipment, materials, labor and operating costs necessary to serve each meter in Orange County REMC’s service territory, regardless of the amount of energy used. In order to ensure the reliable service you expect and deserve, we must maintain the local system, including power lines, substations and other necessary equipment. Like many other businesses, we’ve experienced supply chain issues and steep cost increases for some of our basic equipment. For example, the cost for a distribution transformer (which looks like a long metal can at the top of a power pole) has increased significantly in price over the last couple of years. Because we are a not-for-profit cooperative, some of these expenses must be passed on to our members. I should note that the service charge is the same for everyone and the costs are shared equally across the membership.

The second component of your monthly bill is the kWh charge, which covers how much energy you consume. You’ve likely noticed the amount of energy you use can vary from month to month and is typically impacted by extreme temperatures. When temperatures soar or dip, your cooling and heating equipment run longer, which increases your home energy use. Regardless, energy consumption is an area that you have some control over, and you can lower your monthly bill by actively reducing energy use. Your thermostat is a great place to start, so be sure to keep it close to 78 degrees during summer months. Your REMC also offers a “Time of Use Rate” that allows members to take advantage of a lower rate by using electricity at times during the day when it is cheaper to produce.

The last component of your bill is the Wholesale Power Cost Tracker, which is the same amount for all co-op members. This recently increased because of higher fuel prices, which means the power that Orange County REMC purchases from our wholesale provider is more expensive. The Wholesale Power Cost Tracker covers fuel cost fluctuations without having to continually restructure electricity rates.

I hope this information sheds light on some of the factors that impact electricity prices. While we can’t control the weather or the rising costs of fuels, please know Orange County REMC is doing everything possible to keep internal costs down.


Matt Deaton

General Manager/CEO


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