Rate Study & Design

While the required revenue study determines the total amount it costs to operate the cooperative, the cost-of-service/rate study examines how and why costs are incurred. By analyzing the cost-of-service, we can fairly and appropriately assign costs to each rate class using proper rate-making principles.

Several factors drive cooperative expenses. For example, there are costs associated with power generation and usage. There are also costs incurred with the transmission of power from the power plants to our substations. Lastly, there are costs incurred in distributing the power to members. Distribution costs comprise Western’s expenses for poles, wires, transformers, trucks, facilities, substation maintenance, and line repairs. The cost-of-service analyzes these costs and assigns them to the appropriate categories.

All of these costs are also analyzed by function. Each month your energy bill is split between fixed charges (customer charge and/ or demand charges) and variable charges (energy charge/ kWh).

The cost-of-service/rate study has revealed an imbalance between fixed and variable charges. The customer and demand charges include the expenses related to the facilities directly connected to your property, such as wires, meters, transformers, accounting, transportation, and maintenance. As we go into the rate design phase, we know there will be an increase and realignment of charges to create a more fair balance for all ratepayers.

Power Systems Engineering (PSE), an independent rate consultant, recently completed Western Cooperative's Cost-of-Service Study.

The rate study calculated how much revenue is required to operate successfully, then identified how much each rate class is responsible for to meet the revenue requirement. 

Finally, those amounts are compared to the revenues that are currently being collected from each rate class to determine where deficiencies have emerged. 

This provides the information needed for the Board of Trustees to redesign the rates to ensure adequate and fair revenue collection. 

The first step in the cost of service/rate study is determining the total amount of revenue Western needs to operate.

To reach the amount of revenue needed to maintain service levels, Western may require a rate increase among different rate classes. However, depending on your specific rate classification and energy consumption, your bill could experience a higher or lower impact. The board takes its duty to carefully review and set rates fairly because, after all, they are Western members, pay the same rates, and face the same cost pressures as all our members.

Western's Board of Trustees and Executive Managers continuously monitor the cooperative's financial stability to determine if or when a rate increase is necessary. In order to establish the new rate structure, an independent, experienced rate consultant was hired to conduct a cost-of-service/rate study and recommend changes to our rate structure.

Western remains competitive for some of the lowest electric rates in the state. In the 2020 residential rate survey conducted by Kansas Electric Cooperatives, Western ranked 5th lowest out of the 28 Kansas electric cooperatives. However, recent inflationary pressures have forced cooperatives and utilities to consider rate increases to try to keep pace and maintain financial stability. It is our goal at Western to keep rates as low as possible without sacrificing service levels.

The short answer is that it costs more to serve our members than what Western is collecting in revenue. To compensate for that shortfall, Western must collect more revenue from our members to maintain service levels. As we continue through this process, we will be able to provide more details as they become available.

As a not-for-profit electric cooperative, every member served by Western has an ownership stake in the company. There are no incentives to raise rates for a group of shareholders who would profit from the increases. All excess margins are returned to our members (owners of the cooperative) through the capital credit retirement process. All rate changes are carefully considered and designed to collect enough money to maintain service levels and cover debt requirements from our lenders.

Western remains dedicated to treating all members as fairly and equally as possible. This means reducing subsidization and staying true to our philosophy that cost causers should be the cost payers. It would be discriminatory for Western to unfairly burden one group of consumers to pay a large portion of the costs caused by another group of consumers.

An independent rate consultant, Power Systems Engineering (PSE), performed a cost-of-service study to assign costs across all the rate classes (Residential, General Service, Irrigation, etc..) fairly. This cost-of-service study identified the cost of providing service for each rate class based on load and service characteristics. The cost-of-service study ultimately provides a valuable guideline for assigning cost responsibility to each class fairly and equitably.

Although nearly 2/3 of every dollar Western collects goes directly to purchasing wholesale power, Western has taken many steps to keep expenses and rates as low as possible over the years.

Western's efforts to keep rates stable include:

• Leveraging technology to gain staffing efficiency, allowing the co-op to reduce the total number of positions required from 59 to 52.
• Lowered expenses, including a $2 million reduction in the next four-year construction work plan for nonessential projects.
• Maximizing FEMA reimbursement by recovering more than $27.5 million in Federal Emergency Management Agency (FEMA) claims since 2006.
• Extended Patronage Capital Retirement Rotation cycles to reduce the required revenue for operating the cooperative by more than $500,000 annually.

The Western Cooperative Board of Trustees is reviewing a 3-year plan to redesign the rate structure. If approved, new rates would be effective Jan. 1, 2026, with additional rate adjustments in 2027 and 2028. Smaller, more frequent rate adjustments will help with the impacts on the membership.

In 2023, Western implemented a new rate design. These rate adjustments focused on collecting the required revenue in the first year through increasing the base charge and additional minor adjustments. Years 2 and 3 (2024, 2025) were revenue-neutral adjustments to the energy and demand components of the rates. Although these adjustments may have affected members differently, they did not generate additional revenue for Western to support its operations and services. This new COSS will focus on generating additional revenue to offset inflation and the increased operating costs we have incurred over the past few years. Unfortunately, many of the cost increases we have experienced do not appear to be temporary and will be analyzed to keep the cooperative financially strong without sacrificing the reliability of service to our members.

As a member of an electric cooperative, you have a voice. Western will hold several public meetings to discuss these proposed changes with our members and allow you to voice your comments and concerns.

Those meeting dates are:

• Tues., Oct 21 at 6pm– WaKeeney - 635 S. 13th St.
• Tues., Oct 28 at 6pm – Ellsworth - 221 W. Douglas Ave.
• Wed., Oct. 29 at Noon – Virtual Event
• Thurs., Nov. 6 at 6pm – Plainville - 108 S. Jefferson St.
• Mon., Nov. 10 at 6pm- Otis - 116 Main St.
• Thurs., Nov. 20 at 10am Board Meeting & Vote - 635 S. 13th

The last date is when the Board of Trustees will hold an open meeting on Nov. 20 at 10 am to vote on the proposed rates. If passed, the new rates will go into effect on Jan.1, 2026.

However, if you have questions or concerns at any time - feel free to email us at ratestudy@westerncoop.com