Fall Foliage, Ovando, Montana

What Factors Impact Your Electric Bill?

Posted: August 1, 2023
Mark Hayden, GM

In recent months I have heard the following question more and more. What impact is the current economic environment having on electricity prices? Just as inflation has impacted nearly everything in our day-to-day lives, from the price of gasoline to a carton of eggs, the price we pay for energy at MEC and the cost to deliver it continue to rise. 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 issue of Rural Montana Magazine.

While we have no plans to adjust our electricity rates in 2023, a few key factors have significantly impacted our operating costs since we last raised rates in 2017. To understand your total energy costs and the impacts on your bill, let’s break it down into the three primary components you see monthly: the base charge, energy charge, and peak charge.

The first is a base charge, which helps to cover the fixed costs associated with providing power to our members’ homes and businesses. This includes equipment, labor, and other expenses necessary to serve over 16,000 meters in our service territory, regardless of the energy used. While we have worked hard to manage these costs over the past decade, some have increased significantly. Expenses related to wildfire mitigation, particularly the liability insurance we carry, have skyrocketed in recent years. Unfortunately, the wildfire threat in the West is not going away anytime soon. The Co-op’s proactive approach to wildfire mitigation is and will remain, a critical part of MEC’s commitment to safety in the communities we serve.

The second component of your electric bill is the energy (kWh) charge, which reflects the energy a member uses during the month. Did you know that the energy we purchase from Bonneville Power Administration (BPA) accounts for approximately 48% of MEC’s annual operating cost? This is obviously the largest expense at the cooperative and is scheduled to increase significantly later this year. The increase relates directly to the tremendous growth we are experiencing in the Missoula area, coupled with a sharp rise in the market price of power.

Most of the power we purchase from BPA is low-cost hydropower from the Federal Columbia Power System. MEC’s loads have outgrown this low-cost allocation, and BPA must purchase market power to balance our needs. The market power price has more than doubled since our last BPA rate increase, as has the amount we need to purchase due to growth. We are still reviewing the final impacts of this power cost increase and will likely need to adjust rates for our members in early-2024.

The good news is the energy charge can be reduced by actively monitoring and reducing energy use. The thermostat is a great place to start. It is recommended that thermostats be set to 78 degrees during summer and 68-70 degrees during winter. Smart thermostats are a great option to remotely control your thermostat and help you save money. The Nest thermostat, for example, programs itself, learning your schedule and temperature preferences and building a plan around them. Research has shown that this appliance saves users 10-12% on heating bills and 15% on cooling bills. Another way to save is by signing up for MEC’s in-home or commercial energy audit. A specialist from the Co-op will come to your home or business and conduct a full audit of your energy efficiency. Once the audit is complete, a report will be provided highlighting energy-saving recommendations, rebate opportunities and concerns that may require attention.

Your bill’s third and final component is the peak charge or the hour when your electric usage is at its greatest. Did you know that electricity delivered to your home has to be generated at the same time you’re using it? When many of our members use electricity simultaneously, it creates a peak in electric consumption. These peaks happen when our members get ready for work, return from the office, do household chores, etc. This means that during certain times of day, referred to as peak times, it costs MEC more to purchase electricity. This is because the Co-op pays a premium for power used during BPA’s peak hours, and these costs continue to rise. The Pacific Northwest has historically had ample capacity to meet the peaks in our region. However, as the load grows and we transition away from traditional “base load” generation in favor of more intermittent renewable resources, meeting this peak will become more challenging and expensive.

MEC’s peak hours for residential members are Monday through Friday from 7-10 a.m. and 6-9 p.m. (excluding weekends and major federal holidays). Each weekday, when a residential or small commercial member uses electricity during peak hours, the Co-op’s metering system identifies the largest hour of on-peak usage. It reports it as that day’s peak. At the end of the billing period, our software looks at the daily peaks and selects the highest value, your monthly peak, measured in kilowatts (kW).

Like MEC’s energy charge, members can control much of the peak charge. Some on-peak electricity usage is impossible to avoid. For instance, refrigerators and freezers must run periodically, regardless of the time. Other loads, especially those that use a large amount of power, may be able to run off-peak. Below are a few ways you can reduce your peak:

  • During peak hours, we encourage you to spread out the use of major appliances rather than running them simultaneously.
  • Do laundry and other chores requiring a significant amount of electricity outside peak hours, such as midday, later in the evening, or on weekends. Consider running your dishwasher, washer, dryer, and other appliances outside peak hours.
  • Purchase a qualifying programmable smart thermostat can help reduce peaks by controlling when you heat and cool your home. These thermostats also allow you to take advantage of our thermostat rebate program.

MEC is committed to providing quality customer service and delivering safe and reliable power at the lowest possible cost. We work hard to minimize energy costs because we are accountable to you, our consumer members, not outside investors. If you have questions regarding your energy expenses, we’re here to help! Call our office at 406.541.4433 or visit our website for resources on energy audits, energy assistance programs and more.