ARAB, Ala. -- A fixed oversight in booking at the Arab Electric Cooperative will keep an extra $18,000 dollars a year locally and beneficially impact customers.
New management officials at the Arab Electric Cooperative are going over the books, and in the process, righted oversights. As a result, just over $18,000 each year will remain local.
"Our large industrial customers, the largest customers in our system, had been underpaying for parts of their power, meaning their power price had been less than it cost us to purchase it," explained general manager Scott Spence, "Unfortunately, to make up for that gap, our residential customers and our small commercial customers had been subsidizing that for a long time."
It was an oversight that had been going on for a while, uncovered by a recent internal audit.
"In public power, subsidization is not allowed. Subsidies can be thought of as a class of members paying for something that explicitly benefits another class of customers. In this context, the concept of 'class' of customers is highly regulated and defined by TVA as residential, small commercial, large commercial, etc. Several of our rate classes have unintentionally been subsidizing another rate class due to a book-keeping error," Spence said in a statement, "Specifically, there are 198 larger commercial customers, called GSA2 rate class, in our service territory. Their rates are more complex than the smaller rate classes, and their bills are higher. Those 198 Members pay a collective power bill of about $7.5M annually, which is about 20% of total AECI sales. For context, that is about twice the amount of the combined power bills of the 2,200 smaller commercial accounts. As you can see, these are our largest companies in this area, and they are vital to our community remaining as economically sound as we would like.
The GSA2 rate class had been inadvertently under-priced for a small part (0.25%) of their annual energy. This averages about $92/annually for each GSA2 customer. This energy had been sold at less than cost, which is obviously a direct but we believe unintentional subsidy. As a community, we obviously respect the contribution these Members make as our largest employers, tax base which funds so many things for our families, and the many indirect benefits they provide as well to our lives. Regardless of that sentiment, TVA governs rates and this had to be corrected beginning with the new TVA fiscal year October 1, 2018. $92 a year will likely not impact the financial standing of any of these larger companies, but if it did, we have no choice but to do what is required by our regulators. For the rest of our Members, this cumulative amount, $18,129, is a recurring rate relief they will no longer bear. That will help us keep rates as low as possible as long as possible."
Three weeks ago WHNT News 19 reported how AEC had fixed a book-keeping oversight that would bring back more than $200,000 locally, and 75 to $80,000 a year. This latest addition adds to that. "What this means is there's 18,000 dollars back in our cooperative that residential consumers and small businesses won't have to pay going forward so their rates will be able to stay where they are at least another year," Spence said.
Spence said there could be rate increases across the board in other areas later this year, but because of the money that's coming back, AEC rates won't change this year.