A Sulphur Springs Valley Electric Cooperative rate hike averaging 8.83% has prompted frustration and confusion for customers.
The rate hike, the co-op’s first since 2016, was approved by the Arizona Corporation Commission on Dec. 3 and took effect Jan. 1.
The new rate increase is a permanent adjustment to base rates. The two biggest changes are the increase in the fixed monthly base charge, from $25 to $30, and the increase in the per-kilowatt-hour energy rate, from approximately $0.103 to $0.126.
The increase in the kWh rate is a charge based on electric usage. It means customers will pay more for every unit of electricity used. Bills are typically higher in winter for most customers in higher elevations, summer for those in the desert.
Sulphur Springs filed its proposal for the rate increase in 2024, using data from the previous test year, 2023. Ultimately, the cost of generating electricity fluctuates with the markets, which have changed considerably since 2023.
Sulphur Springs says the rate change was necessary for several reasons, including rising operating costs and wholesale power costs since its last rate hike in 2016. The co-op says the hike ensures better operations moving forward, including fairness across members, infrastructure improvements, and more reliable customer service.
The rate increase applies to every Sulphur Springs member. Unlike a private utility company, Sulphur Springs has no outside shareholders; all customers are members of the cooperative by default, meaning the same people paying the electricity bills collectively own the co-op.
As a cooperative, SSVEC is a nonprofit utility, meaning that it’s owned by customers, not shareholders. Money made by the business, called “margins” instead of profit, is used to manage operating costs, reinvest in SSVEC service and infrastructure, or is returned to members as capital credits.
According to the co-op’s website, an average residential member uses about 752 kilowatt hours kWh per month, and based on that usage, their monthly bill is expected to rise from $127.41 to $138.66, so approximately $11.25 or 8.83% more.
Lower-use households, such as residents who live alone, may see a smaller total increase. However, the base rate change makes it so that even customers who use low amounts of electricity will notice higher bills. Higher-use households, including large families with higher heating/cooling demands, and properties with acreage or wells, may see a higher monthly increase.
Some members, even those reporting lower than average electric usage, say their bills have increased at a much higher rate – one that’s largely inconsistent with Sulphur Springs’ 8.83% projection.
Eric Petermann, the public relations manager for SSVEC, said the 8.83% figure reflects a specific calculation based on the 2023 test year and the market average power costs at that time.
“I understand how frustrating it is to see a bill increase by more than the published 8.83%, and I appreciate the opportunity to clarify how that figure was calculated,” Petermann said.
The discrepancy can be largely attributed to the Power Cost Adjustment, or PCA, a line item on member utility bills, which varies monthly. The variability of the PCA means a member might see an increase in excess of 8.83% for one month, and at a lesser percentage in another. In essence, their bills should reflect an average increase of 8.83% over time.
“The PCA value fluctuates with the market and is reflected on a member’s bill as either a charge or a credit,” said Nicole Garcia, the public information officer for the Arizona Corporation Commission.
In electric utilities, the PCA acts as a balancing mechanism. Sulphur Springs uses the PCA to adjust member bills based on fluctuations in the market, such as volatile fuel prices, extreme weather and high demand.
“The estimated customer bill impacts calculated during a rate case are just that – estimates,” she said. “If actual power costs exceed the base rate, a PCA charge is applied. If actual costs are lower, a PCA credit is applied to the bill.”
Surcharges like the PCA are dependent on the price of fuel used to generate electricity, and the markets determine the cost of fuel. During the summer months, when extreme heat puts air conditioning in higher demand, the market price of fuel is higher, and Sulphur Springs might have to buy more fuel to meet members’ electricity demands.
The rate hike also includes additional charges. One of the most significant is the increase in Residential Auxiliary Service charge, which applies to certain accounts with higher-capacity electrical service; for example, households with individual water wells, barns and other noncommercial users.
When combined – the 8.83% increase, monthly fluctuations in the PCA, the approximate 20% increase in the Basic Service charge, and the new Rate Case Recovery charge – “the total bill impact for an individual member can be higher than 8.83%,” Petermann said. “The exact percentage will vary depending on usage and rate class.”
The new rate structure also includes updates to the co-op’s time-of-use pricing, changing “peak” hours for the program to 1 p.m. to 7 p.m. Time-of-use pricing and peak hours apply only to households that “opt in” to the program.
Cory East, vice president of member engagement for SSVEC, explained that the co-op offers different plans suited to a customer’s usage and lifestyle. To eliminate unexpectedly high bills, East recommends the budget billing program. If signed up for budget billing, Sulphur Springs will average energy use over the past 12 months to create a stable, monthly, interest-free payment.
Adding to concerns over the rate increase was a mishap in which Sulphur Springs mistakenly applied the new rates to bills going out in January for December usage. Those mistaken charges were reversed in subsequent bills.
Sandra Ruppel, a local real estate agent, said she was unaware of the rate change until it was accidentally implemented in December. “To have my bill jump $120 in one month was a little shocking,” she said.
She called SSVEC’s Willcox office to address the confusion, and although her bill was adjusted, Ruppel claimed she still didn’t know what the rate increase meant for her moving forward.
“The main thing was that their messaging was not clear,” she said. When Ruppel expressed her frustration on a community Facebook page, community members responded with similar concerns. Many cited their personal electric bills, which have increased at rates inconsistent with projections provided by Sulphur Springs.
“I have yet to get a clear understanding of the rate structure and if it even applies to me,” said Gail Christmann, another member of the Facebook group.
East said members can contact the co-op’s customer service at 520-457-3526 or email memberservices@ssvec.org to learn about charges, find programs intended to mitigate costs, or ask any additional questions they might have. The co-op directors “love when members are engaged, and those conversations are shared with the entire board and management team,” he said.
Customers can also reach out to their local board representative. For residents in the Patagonia-Sonoita area, Tom Goodman is the representative, acting as a liaison for member concerns.
Members can also attend monthly board meetings, participate in board elections, and attend annual meetings, which typically rotate from Sierra Vista, Benson, and Willcox. Meeting schedules are posted on the SSVEC online calendar.
“At the end of the day, we’re a member-owned cooperative,” East said. “We’re here to help them and serve them.”