Garkane Power Association consumer-members began paying more for their electricity in April but won't find out how much more until their May billings.
The increase is expected to average between $3 and $4 per month for residential customers, reflected through the utility's use of a wholesale power cost adjustment that increases revenues in order to offset higher power costs.The board of directors saw the need to recover costs and the financial integrity of the cooperative, said Glen Willardson, general manager. "Wholesale power costs to Garkane have increased more than 70 percent since 1987."
Four reasons for the increase were given: (1) Surplus energy has not been available from the Western Area Power Administration because of a below normal water year in the Colorado River Basin; (2) increased sales and demand on the system, requiring high-cost purchases; (3) increased purchases from Deseret Generation and Transmission, a high-cost power supplier; and (4) a very cold winter.
"The past four months Garkane has operated at a loss each month and needs to recover these costs to remain financially strong and to meet its mortgage requirements with the Rural Electrification Administration and the Cooperative Finance Corporation," Willardson said. "The wholesale power adjustment will remain in effect until a formal cost service study is completed and Garkane's overall rate structure is analyzed in detail."
This will mark the first rate adjustment for Garkane customers in three years.
The wholesale power cost adjustment is a part of every rate schedule approved by the Utah Public Service Commission and the Arizona Corporation Commission. It allows the cooperative a method for recovering increased wholesale power costs.
Garkane operates in several southern Utah counties and two counties in northern Arizona.
Most of Garkane's power, 56.2 percent last year, is purchased from WAPA. Some 10.8 percent was bought from Deseret Generation and Transmission and 13.5 percent from co-generators. The cooperative produced 19.5 percent from its own hydro plant.
The Deseret G&T coal-produced power costs 7.9 cents per kilowatt hour, Garkane's most expensive power source. The cost of co-generator power, produced from hydro and diesel, was 5.6 cents. Garkane paid 1.2 cents per kilowatt hour for WAPA hydro power and it cost 1.1 cent to produce its own hydro power.
Residential power consumption on Garkane's system is second only to large commercial users. The latter account for 42.7 percent of the electrical usage while home owners and house renters consume 33 percent.
Small commercial customers use 16.3 percent, 3.6 percent is used for irrigation, and 2.7 percent for street lighting and local governments. Seasonal power use accounted for 1.6 percent last year.
Mike Peterson, public relations official, explained that Garkane has had to buy more expensive power because of increased sales. The additional purchases have come from Deseret G&T, the most expensive of any of the purchase sources. "We also bought more power from that source in February because it was an extremely cold month."
The increase in the cost to purchase power was evident before this year. An operating statement of the utility shows it spent about $3.4 million in power costs last year as compared to about $2 million in 1987. Interest expense increased by $123,000.
Garkane officials were able to tighten their expense belts in some cases. For example, administrative and general expenses were cut to $964,000 in 1988 from about $1 million in 1987. Distribution expenses were cut slightly, from $247,000 to $253,000. However, consumer service expenses increased from $39,000 to $63,000 and distribution expenses rose from $448,000 to $491,000.
Total costs to Garkane for electric service in 1988 was $6,750,000, a substantial rise above the 1987 figure of $5,328,000.
Earnings were less in 1988, with net margins of $490,000 as compared to $1.3 million in 1987.
The cooperative has about $22 million in total assets, mostly offset by liabilities. Its long-term debt is about $14 million.