UPDATE: All proposed changes mentioned in the below story were approved by Midwest Energy's Board of Directors on May 17, 2021; changes go into effect July 1, 2021.
Midwest Energy's Board of Directors will consider proposed natural gas rate changes that would raise an additional $1.04 million per year compared to current rates. The increase would support pipeline safety expenses, reliability improvements and operating expense increases since the last general rate case in 2016.
Included in the proposal is implementation of a formula rate, eliminating the current Gas Infrastructure Rider and Ad Valorem Rider. The formula rate would incorporate capital additions and expense increases not currently covered by those two riders, resulting in an annual rate adjustment for all the prior year’s capital additions and operating expense changes.
If adopted, the new rates would result in an average residential increase of 98¢ per month compared to current rates, based on 2020 usage. Rate design changes include increasing the fixed Residential customer charge by $1 to $19, and eliminating the current Gas Infrastructure Rider and Ad Valorem (property tax) Rider for all classes. The combination of these items reduces the Residential customer charge by a small amount.
A "Town Hall" meeting to discuss the gas rate changes was held April 8, 2021; a video of that meeting is available here.
Questions and Answers:
Q: Why is this rate increase necessary?
A: The costs of capital improvements plus operating and administrative expenses have increased since the last general rate case in 2016. Annual adjustments such as the Gas Infrastructure Rider and Ad Valorem (property tax) Rider adjusted automatically to cover property taxes and most capital additions. However, other expenses such as wages, vehicles, tools, and insurance are not covered by automatic riders. Every few years Midwest Energy changes its base rates to match those expenses. This proposal replaces the current base rate and riders with a formula rate resulting in an annual rate adjustment for the prior year’s capital additions and operating expense changes.
Q: What’s the purpose of the customer charge, and will it change?
A: The customer charge is intended to cover costs that vary more closely with the number of customers served rather than the amount of gas consumed. Examples include meters, regulators, yard lines, meter reading, billing and customer service functions. Under the rate change, the base residential customer charge increases $1 per month, to $19, but the $1.42 Gas Infrastructure Rider will be removed, leaving a net fixed charge decrease of $.42 per month. The residential delivery charge would increase from 13.5 cents to 16 cents per therm.
Q: What is the change to the customer charge for other rate classes?
A: The change in the customer charge varies according to rate schedule. The existing customer charge plus Gas Infrastructure Rider and the proposed customer charge with the Gas Infrastructure Rider removed are shown below.
Q: How much would my bill increase?
A: An independent cost-of-service study was performed to fairly assign costs across rate classes. Based on rate classification and consumption, the impact will vary – an overall bill may increase or decrease. A residential customer will see the following monthly bills (before taxes) for the indicated therms used, assuming a 50¢ per therm cost of gas:
Commercial retail customers will see the following bills (before taxes):
Q: Were changes made to any other rate schedules?
A: Yes, several rate schedules were revised. Click here to read all proposed revisions to rate schedules and cancelled rate schedules.
Q: When was the last rate increase?
A: Midwest Energy’s last general rate increase was in 2016. Midwest Energy works hard to control costs, and by employing cost-saving technology and improved procedures we have kept our rates stable for several years. However, a 2019 cost-of-service study revealed the need to update our rate structures.
Q: Who determines when a rate increase is necessary, and by how much?
A: Midwest Energy’s Executive Staff continuously monitors the financial stability of the cooperative and makes recommendations to the Board of Directors to determine if or when a rate increase is necessary. To establish the new rate structure, an independent, experienced firm was hired to review and recommend changes to our rates.
Q: How do Midwest Energy’s rates compare to other gas utilities in Kansas?
A: Midwest Energy’s Residential and Commercial natural gas delivery rates historically have consistently been the lowest in the state compared to the other Kansas gas utilities. As proposed, Midwest Energy’s Residential gas rates will remain among the lowest with Commercial rates still being the lowest compared to the other Kansas gas utilities.
Q: Will Midwest Energy still have a Cold Weather Rule to prevent service disconnection in the winter?
A: Yes. The rate changes don’t impact the Cold Weather Rule (CWR) for residential customers.
Q: What is the effective date of the new rates, and when would I see them on my bill?
A: The rates go into effect with the first billing cycle based on meter readings dated no sooner than July 1, 2021.
Q: Is the rate increase proposal a result of the deployment of automated metering infrastructure?
A: Midwest Energy is always looking for ways to better serve you more efficiently. The automated metering system has already and will continue to provide operational efficiencies, control costs, and improve reliability of your service.
Q: How could customers make concerns known to the Board?
A: Customers may send comments regarding the proposed rate changes to Midwest Energy no later than May 7, 2021. Comments should be addressed to Bob Muirhead, VP for Customer Service, at email@example.com.
Page updated May 18, 2021