SIERRA VISTA — Sulphur Springs Valley Electric Cooperative on Monday filed an application with the Arizona Corporation Commission for a rate increase.

SSVEC’s Chief Executive Officer Creden W. Huber said the utility is asking for an increase of approximately 11.75 percent, which could go into effect late in 2009 or early 2010. The amount for individuals or businesses will vary depending on their rate class and usage. The proposed increase will be the first in 16 years for the cooperative.

The cooperative hired an independent outside consultant to conduct the cost of service study. The study analyzed costs from 2007 as the test year to determine the actual cost of providing electricity to each of the cooperative’s rate classes. “Our intent is for each customer class (residential, agricultural, small business and large commercial/industrial) to pay their own way and not have one group subsidize another,” Huber said.

The last rate case was based on the test year 1991. During the intervening years, prices for almost all consumer items have risen, some dramatically. “The cost for a new home rose 113 percent and a new car rose about 44 percent. And everyone is aware of the drastic increase in gasoline and grocery costs just this past year,” Huber said.

Material costs for electric utilities have also seen substantial increases within the past few years. Equipment costs for all aspects of electricity production in the U.S. rose between 25 and 35 percent from 2004 to 2007. In the same time period, the general inflation rate was 8 percent.

“One of the most visible parts of our electric system is wooden poles. The increase in cost for those poles from 2001 to 2006 has been 26 percent, and the cost for overhead wire increased 54 percent,” Huber said.

 He added, “From 2002 to 2006 the cost of an underground transformer rose 50 percent, and a substation transformer increased in price 102 percent from 2004 to 2006.”

Global demand for electricity has been responsible for a great deal of the cost increase, and the construction of electric infrastructure of countries such as China and India has contributed to the increase.

Huber explained, “China with 1.3 billion people has an economy growing at 10 percent per year. Experts say China is completing three to four coal-fired power plants each month. And India with a population of 1.1 billion people is anticipating the construction of 200 coal-fired electric plants by 2015.”

Though a variety of factors have resulted in the need for an increase, Huber stated that growth of the cooperative’s system is the major reason. “Escalating prices for materials and equipment brought on by this global demand and increased electric usage by individual homeowners, businesses and agricultural customers are surpassed by growth of the cooperative’s electric system.”

As SSVEC’s service area grows, so does the demand for electricity and the facilities to deliver it. Huber said that from 1991 to 2007 sales increased from 357 million kilowatt-hours to 796 kilowatt-hours and the peak demand rose from 66,000 kilowatts to 189,000 kilowatts.

SSVEC’s system was valued at approximately $76 million in 1991 and slightly more than $230.5 million in 2007.

Last year SSVEC’s net profits were about $4.6 million. However, these gains did not come from electricity distribution, which had a net loss.

“SSVEC actually had a net loss of $917,989 in our core business of distributing electricity to our members in 2007,” said Huber at the cooperative’s annual meeting in April.

Huber added that the increase in employees since 1991 has been modest in comparison to the increase in electric services. “In 1991 SSVEC had 164 employees for 34,000 electric services; in 2007 we had 177 employees for 50,000 services. Our payroll as a percentage of revenue dropped from 10.98 percent in 1991 to 7.18 percent in 2007,” he said.

He explained that over the past 15 years SSVEC has taken other measures to reduce costs including the use of automatic meter reading technology, GIS mapping, standardizing system design, creating a program to provide revenues for salvage materials, and increasing the cooperative’s margins by almost one-half million dollars last year through high-speed wireless Internet service and the sale of various goods and services.

“A decade and a half is a long time for any business to sustain its prices. We were able to postpone an increase for so long because of efforts by the cooperative’s board, management and employees,” Huber said.

On the Net

Sulphur Springs Valley Electric Cooperative: ssvec.org