Midwest’s Residential Rates Lowest, But Challenges Emerging
Midwest Energy’s residential electric rates are the lowest among Kansas-based electric co-ops, and are lower than rates paid by urban customers of the state’s largest investor-owned utility (IOU).
In 2022, Midwest Energy’s residential electric customers paid an all-inclusive average of 12.1¢ per kilowatt hour, the lowest of any Kansas-based co-op and 18.5 percent below the Kansas co-op average. Similarly, Midwest Energy’s rates were 13 percent lower than the average for investor-owned utilities.
Patrick Parke, Midwest Energy’s Chief Executive Officer, noted the low rates are a result several factors, including an abundance of renewable energy in the area often creating low hourly wholesale market prices; conscientious employees and Board members; and a long-standing goal of keeping rate growth at or below inflation.
Parke cautioned, however, that policies favoring renewable energy development over all alternatives, a growing dependence on natural gas, and retirements of firm resources before replacement technologies are ready, will lead to more volatility in energy market prices, as well as more frequent appeals for conservation in peak periods.
“Future cost and reliability challenges are not simply due to the addition of more renewable resources on the grid,” Parke emphasized. “Rather, the early retirement of base-load generation like coal plants, and concentrated dependence on natural gas bring new concerns.” Frozen natural gas production was the largest source of generation shortfalls in the Southwest Power Pool in 2021’s Winter Storm Uri.
Parke said another factor impacting future rates is the need for transmission construction. “Federal policy direction on transmission line cost responsibility for renewables development is not helpful.” Much of Midwest Energy’s transmission system was built in the 1950s through 1970s. At costs approaching $1 million per mile, rebuilding old lines and upgrading them to export renewable energy to other regions will require many millions of dollars. This will add cost pressures; the company’s most recent 10-year financial forecast anticipates three percent annual rate growth.
Parke noted the company’s newly adopted demand rates will help customers manage bills. “Many of our costs stem from investments to meet peak load conditions. Customers can help us manage costs by reducing consumption during peak load conditions.” he said.
Parke added, “In the meantime, we’ll take all the steps we can to keep future bills as low as possible, including encouraging energy conservation through our How$mart program, improving cost containment practices, pursuing federal grant opportunities, and working with elected officials on energy policy.”