Performance, rates and valueRon Holcomb | Monday, May 29, 2017
Effective June 2017, Tipmont’s service charge will increase from $29 per month to $32.50 per month for residential members. The rate adjustment pays for continued investment in the distribution system to maintain service reliability.
In 2012, Tipmont launched an initiative to improve your service reliability while continuing to meet the growing demand for power in our service area. Since then, Tipmont’s crews have rebuilt more than 120 miles of overhead lines and have installed more than 371 miles of underground lines. Many overhead copper lines were replaced with aluminum lines, a much more durable and lasting product. Tipmont also added five new substations to the distribution system to meet the increasing demand for power, not only today, but for decades down the road.
We also moved from a six-year to a threeyear tree trimming cycle. As a result, outages caused by trees have dropped by 64 percent from 2012. For the factors we can control, these improvements have increased service reliability to levels not seen in Tipmont’s recent service history. Tipmont members will reap the benefits of reduced outage frequency and duration for years to come.
System investment and low interest rates
Tipmont’s total utility plant assets increased 31 percent over a five-year period from 2012 to the end of 2016. These investments in poles, conductor, substations and related plant are funded through long-term borrowing and the rates you pay. Low interest rates in recent years combined with a smart borrowing strategy have helped us hold rates down. In fact, Tipmont’s blended interest rate in 2012 was 4.1 percent, and at the end of 2016, our blended interest rate was 3.4 percent, yielding a significant decrease in our cost of capital.
To maintain a healthy balance, part of the revenue generated from rates is applied to system investments each year. Generally speaking, Tipmont funds approximately onethird of capital spending from rates and the remaining two-thirds from long-term borrowing. This balanced approach ensures members who benefit from the distribution system pay for the system over its useful life while also allowing Tipmont to maintain financial flexibility.
There are often questions about the purpose of the service charge. The service charge helps pay for maintaining and operating the distribution system and is largely independent of energy sales. This includes the poles, wires, transformers and service personnel necessary to make the system work, regardless of how much energy is used. The service charge contributes to covering these fixed costs.
Over a five-year period from 2012 to 2017, the total energy services cost for the average residential member has increased by less than 1 percent per year while the cumulative rate of inflation over the same period is more than 6 percent. In other words, Tipmont’s rate adjustments over the last five years are significantly less than the general increase in prices. I’m particularly proud of this accomplishment especially given the significant increases in performance and system investment Tipmont has delivered to its membership over the same period.
Further information and member meetings
A web page with more information, including how the rate adjustment affects each rate class, is available at tipmont.org/2017rates. We’ll be holding member meetings on June 6 at Fountain Central High School and June 7 at Battle Ground Middle School to help answer your questions. It’s important that we hear from you, and I hope you’re able to attend. More details are available at tipmont.org/2017rates.
- Last modified: Wednesday, May 31, 2017
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Ron Holcomb is CEO of Tipmont REMC.