Midwest Energy is considering changes to its residential electric line extension policy, which will affect customers who request a new delivery point. The proposal would replace a length-based line extension allowance with a fixed-cost allowance, making new line extensions fairer to all customers. Midwest Energy’s Board of Directors has opened a member comment period on the proposal through Jan. 3.
It is common practice for utilities to cover a portion of the costs of providing service to new homes, both in urban subdivisions and for individual builders in rural areas. Currently, Midwest Energy covers the cost of constructing 1/4 of a mile of line in rural areas. In urban areas, developers pay up-front, but Midwest Energy reimburses the full amount as homes are built and occupied.
However, this approach has failed to keep pace with construction cost increases. Today, extending above-ground lines costs more than $40,000 per mile (burying lines underground is even more expensive). Midwest Energy’s contribution in the above scenario would total more than $10,000 in a rural area, far more than our cooperative will ever recover from that customer through rates. Thus, other customers end up providing a subsidy.
Patrick Parke, Vice President Customer Service explained, “Only a small portion of a residential bill is used for building and replacing power lines. Most revenue goes to wholesale power costs, generating plants, routine maintenance and other expenses.”
The proposed changes to the line extension policy would cap Midwest Energy’s share at $3,000. Costs exceeding that amount would be repaid by customers over a mutually agreed upon period.
“The proposal allows Midwest Energy to support growth and residential construction, while not unduly burdening existing customers,” said Parke. “Setting a fixed-cost line extension allowance allows us to meet both goals, ensuring that those receiving the benefits of new service pay their fair share of costs.”
The decades-old approach of providing a fixed length of line, usually 1/4 of a mile, at no charge was once the norm in Kansas. However, a recent survey found that 12 of 29 Kansas cooperatives have moved to other approaches such as a fixed dollar amount.
The Board of Directors will consider this proposal during its regular meeting on Jan. 20, 2014, at 1 p.m., at Midwest Energy's offices, 1330 Canterbury Dr., Hays, Kan. This meeting is open to Midwest Energy members, who will be given the opportunity to discuss the proposal with the Board. If approved by the Board of Directors, the changes would take effect no sooner than Feb. 1, 2014. Members who wish to comment on the proposal may submit written comments no later than Jan. 3, 2014 to:
Vice President, Customer Service
Midwest Energy, Inc.
PO Box 898
Hays, KS 67601
or online via email. Wording of the proposed policy can be found here or by request to the preceding addresses.