Is that a catchy title or what? The PSCR, or power supply cost recovery, is a rate mechanism that allows a utility to pass to consumer-members the actual costs paid for wholesale power and fuel. Essentially, it is a tool for keeping your cooperative on budget.
Nearly 70 cents of every dollar expensed at Cherryland is spent on wholesale power costs. This leaves us only 30 cents to do every day things like buy gas, meet payroll and maintain our electric system. This is a tight margin that could be drastically affected if we are off the mark in our wholesale power budgeting process.
This tool was approved by the Michigan Public Service Commission for use by all utilities way back in 1982. It is used by virtually every utility in the state. Until a couple of years ago, Cherryland used it via a separate line item on your bill. When we had our last rate adjustment, wholesale rates were stable and predicted to be stable into the future. So, we dropped the separate line item from your bill.
Well, as you can imagine, times change. I can feel you bracing for the bad news BUT hold on. This story has a happy ending this time. The separate PSCR line item WILL appear on your bill once again.
I am happy to report that it will return in the form of a small reduction. We expect this decrease to last a few months. The reduction will be a negative 0.008 cents per kilowatt-hour (kWh). For an average member using 750 kWh per month, their bill will be reduced by approximately $6.
Why is this happening? We had a reduction in our power supply costs in 2018 that caused us to collect $1 million more than we had budgeted to take in. We could keep this as margins to be returned in 20 to 25 years, or we could return it to the people who actually paid for it last year. Since Cherryland is a not-for-profit utility and we remain committed to only charging the minimum necessary to meet our required financial and reliability targets, your board chose to return it sooner rather than later in the form of this 2019 PSCR credit.
As you may know, Cherryland buys 100 percent of our wholesale power supply from Wolverine Power Cooperative. The long-term stability and financial strength of Wolverine allow us to return this money in 2019 confidently. Wolverine has locked in an industry-leading portfolio of diversified fuel resources that was 62 percent carbon-free in 2018. As this decrease indicates, Wolverine met our mission of affordability as well.
Someday, in the future nobody can predict today, we will have a PSCR increase that will help us balance our budget in the other direction. For now, let’s all take this good news for what it is—the result of years of planning, building, budgeting and developing a long-term portfolio of power supply by the men and women at Wolverine Power Cooperative.