Why has my bill increased?
Every winter, members see higher bills after the new year as winter weather sets in. This year, the bills are even a little higher because of extra money we must collect and send along to Dominion Power and AEP for electric transmission service.
CVEC members will notice a Power Cost Adjustment (PCA) increase effective January 1, 2018 due to increased transmission provider charges. The PCA clause for CVEC is a mechanism to allow CVEC to pass through any increase or decrease in wholesale power costs without markups or margins. This is not an increase in the rates that CVEC has negotiated and locked-in for 2018 with its power suppliers, rather an increase in the charge from Dominion and AEP to move that power along their transmission lines. The average monthly residential bill will increase by around $12.
The first factor in the increase was a winter peak in 2017 on the Dominion Power transmission system. CVEC uses the AEP and Dominion Power transmission systems to bring wholesale electricity from the markets into the CVEC distribution substations. About 85% of our electricity comes through the Dominion Power transmission lines and the rest through the AEP lines. The charges for each year for the two systems are based on the one peak hour of the previous year. When the peak hour is in the winter, CVEC has much higher loading on the transmission lines which increases the share of the system transmission charges we must pay in the next year. The impact of having the Dominion Power transmission system experience a winter peak last year resulted in an increase of over $4 million for CVEC members to pay in power costs in 2018.
In addition to the winter peak, transmission costs from AEP and Dominion have increased significantly. The wholesale rate increases for just 2018 are 28% for AEP and 11% for Dominion. These steep increases result in another $2 million addition to transmission costs for CVEC. The transmission costs are regulated by the Federal Energy Regulatory Commission (FERC). These rates are submitted by the transmission providers to FERC and, when approved, all transmission customers like CVEC must pay them since we must use their system to get the electricity to our substations.
CVEC is committed to seeking ways to manage and reduce costs from transmission providers. No additional services or improved efficiency will be offered for the increased transmission costs and no money will be gained by CVEC. Having already seen a very high load on the transmission system in the first week of 2018, it appears that CVEC will again have high transmission costs in 2019 as well. Given the trend toward more winter peaks and higher transmission charges, CVEC will review options for reducing load during the peak winter hour of 7am to 8 am on cold weekday mornings which is when the typical winter peak is set.
The graph below details the change in transmission costs over the last seven years. The transmission system did not have a winter peak for 25 years before 2014. The polar vortex in that year resulted in the increase in the 2015 charges. A winter peak followed in 2015 causing the 2016 charges to be high again. The following year the transmission system peaked in the summer, dropping overall charges significantly. These lower rates were passed through last year through a lower PCA factor. This year the charges will be up again due to the winter peak in 2017.