Consumer-members of the Garkane Power Association didn't particularly care for what they saw on their October electrical billings - a .8 cent per kilowatt-hour rate increase.
Garkane Manager Glen Willardson said not only was additional revenue badly needed but noted that projections show costs will substantially rise again next year. Without the increases, the association's officials say the financial position of the cooperative would drop to unacceptable levels."In addition to raising revenue, we are examining all expenses at the cooperative to cut back wherever possible without compromising service and reliability to our consumers," Willardson said.
Willardson said the use of a wholesale power cost adjustment (which allows the association to increase rates) helps Garkane begin to meet its revenue needs immediately, prior to receiving approval for new rate schedules. Utah rates can be determined by the Board of Directors and procedurally filed with the Utah Public Service Commission.
It may take a year to receive approval of the Arizona Commission, however. Some of Garkane's consumer-members live in northern Arizona.
"Without the wholesale power cost adjustment, the administrative delays would seriously hamper Garkane's ability to remain financially stable," he said.
The current rate increase is expected to boost the association's annual revenue by about $1 million.
"The rate increase went into effect in September and produced about $83,000 in additional revenue," said Carl Albrecht, assistant manager. "We expect it to average about $80,000 per month."
"The main cause of this increase is the price Garkane must pay to purchase supplemental electricity sold to our customers," Willardson said. Costs of wholesale power purchases continue to escalate each year.
Most of Garkane's electricity since the 1960s has been generated at hydroelectric facilities through the Colorado River Storage Project. Garkane received more than 77 percent of its power from that source in 1984 and was able to meet the remaining needs through electricity generation at the association's hydro plant in Boulder, Garfield County. But that isn't the case now.
This year, only half of Garkane's power needs have been met through the CRSP. The Boulder Hydro Plant supplied only 1 percent. The remaining required power has been purchased from cogenerators like the Intermountain Refining Co. in Fredonia, Ariz., and the Deseret Generation and Transmission Cooperative.
"The big problem now is the cost of these various sources of power," Albrecht said. Electricity generated by hydro plants at Glen Canyon Dam and Boulder costs Garkane only about 1.1 cents per kwh. But power purchased from Deseret costs seven to 12 cents per kwh, depending on the amount purchased each month.
Deseret is a coal-fired generation and transmission cooperative formed in 1978 by six intermountain area rural electric cooperatives to provide supplemental power. Garkane has a contract with Deseret (through the REA) that prohibits purchasing power on the open market where electricity could be bought at rates of 50 percent less than from Deseret, Garkane officials note.
Each new kwh purchased by Garkane comes from the most expensive source, officials said. In addition, the cost of electricity bought from the CRSP source is scheduled to increase significantly in October of 1990.
At one time, Garkane's Boulder plant generated enough electricity to meet all needs of the cooperative's members. Garkane is now serving more customers, and they are using more electricity to operate modern appliances and equipment never thought of 40 years ago, Willardson said. That has put the crunch on inexpensive power supplies.
Severe drought conditions have also resulted in hydroelectric facilities producing a limited amount of power available for purchase.
Garkane Board President Mondell Syrett said the association's directors don't look forward to increasing power rates but "to maintain the financial integrity of the cooperative, this was a decision we had to make."
Director Lee Bistline added that board members were faced with the decision to either curtail the many services Garkane provides, from electricity in the home to power for irrigation pumps, sawmills and mines, or raise more revenue. He concluded that the only other alternative "is go out of business."