Factors That Impact Electricity Prices

I was recently asked by one of our members about what impacts electricity prices. We talked about how the daily cost of living seems to have increased across the board.

Just as inflation has impacted everything from the price of gasoline to the price of eggs, costs for the fuels required to produce electricity have also risen. 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 Kansas Country Living.

While there is no short answer, there are a few key elements that impact electricity prices and rates. Some of these factors Lane-Scott Electric can manage, some of them you can impact, and other factors are beyond our control. So, let me break it down.   

The primary charges on a residential member’s monthly electric bill are the Customer Charge, an energy charge/kWh charge, and a Energy Cost Adjustment (ECA). Larger electricity consuming members such as our General Service Large and Large Industrial rates also have a kW/Demand charge. To understand your total energy costs and what impacts your bill, lets unpack one piece at a time.   

The customer charge covers the costs associated with providing electricity to your home. This includes equipment, materials, labor, and operating costs necessary to serve each meter in Lane-Scott Electric’s service territory, regardless of the amount of energy used. To ensure the reliable service you expect and deserve, we must maintain the local system, including power lines, substations, and other necessary equipment. Like many other businesses, we’ve experienced supply chain issues and steep cost increases for some of our basic equipment. For example, the cost for a distribution transformer (which looks like a tall metal can at the top of a power pole) went up 40-60%, and wait times to receive this essential equipment can be up to 2 years. I should note that the customer charge is the same for everyone and the costs are shared equally across the membership. 

Another component of your monthly bill is the kWh charge, which covers how much energy you consume. You’ve likely noticed the amount of energy you use can vary from month to month and is typically impacted by extreme temperatures. When temperatures soar or dip, your cooling and heating equipment run longer, which increases your home energy use. Regardless, energy consumption is an area that you have some control over, and you can lower your monthly bill by actively reducing energy use. Your thermostat is a great place to start, so be sure to keep it close to 78 degrees during summer months.

          The last component for all member’s bills is the ECA, which is the same amount for all co-op members and a factor out of the control of Lane-Scott Electric. The ECA is a pass-through cost for the price of energy and fluctuates on your bill depending on whether the cost exceeds or falls below the amount budgeted by Lane-Scott Electric. If the power that Lane-Scott purchases from our wholesale provider is more expensive than budgeted, your bill will reflect an ECA charge, if it’s less there will be an ECA credit. The ECA covers fuel cost fluctuations without having to continually restructure electricity rates.  

          The kW/Demand is the amount of power being used at a given time. While the energy charge is based on the volume of energy used in kWh, demand is based on the intensity at which energy is used, or the demand one puts on the system, and measured in kilowatts (kW).

Lane-Scott bills now show the highest measured demand during the billing period. The Large Industrial and General Service Large rates that bill for demand, use the peak demand to calculate the charge for the billing period.

          I hope this information sheds light on some of the factors that impact electricity prices. While we can’t control the weather or the rising costs of fuels, please know Lane-Scott Electric is doing everything possible to keep internal costs down. In fact, Lane-Scott Electric achieved the fifth lowest residential rate among Kansas cooperatives in 2022 and about 15.4% below the local municipal rates.

We’re here to help you, too. Contact us if you have questions about your energy bill or for advice on how to save energy at home.