We rely on electricity to power our lives. Whether at home or at work, at the gas pump or the grocery store, electricity – an abundant and affordable resource – affects us.
Unfortunately, real-world conditions can affect the price of electricity. While the energy we use every day remains a tremendous value, especially compared to the skyrocketing prices of other common goods and services, the cost of producing and purchasing that energy is rising.
Baldwin EMC works alongside its wholesale power supplier, PowerSouth, to keep rates as stable as possible. As a member of the local community, Baldwin EMC is driven by the goal of providing reliable electricity at an affordable price. Several factors beyond our control have increased the cost of achieving such a goal.
What’s Driving Up Costs?
Power plants rely on fuels such as natural gas and coal to produce the electricity that companies like Baldwin EMC distribute to our members. These fuels allow us to provide large amounts of energy at an economical cost around the clock.
Natural gas is a reliable, clean-burning and cost-effective fuel source, and PowerSouth operates state-of-the-art power plants in Gantt and McIntosh, Alabama.
Coal-fired generation has long been a cornerstone of the energy mix, and will continue to serve a portion of our members’ energy needs in the future. Like natural gas, it offers a steady supply of energy at a low cost.
The prices for these fuels, particularly natural gas, which makes up around 80 percent of PowerSouth’s generation fuel mix, are higher now than they’ve been in ten years, and they’re steadily trending upward. According to the U.S. Energy Information Administration, natural gas spot prices averaged $6.59 per million British thermal units (MMBtu) in April 2022. They are forecasted to rise to $8.59 per MMBtu in the second half of 2022 – more than triple the $2.66 MMBtu average cost seen in April 2021.
Global demand and tight fuel supplies, along with labor shortages at coal mines and railroads, are also affecting the cost of generating and purchasing power. Additionally, supply chain shortages have caused a spike in the costs of materials, including transformers and electrical conduit.
Demand Plays a Role
Unfortunately, this has all coincided with the arrival of one of the hottest summers ever recorded in our area.
Under normal conditions, summer is a time when electricity use peaks, as our members are using more electricity to keep their homes cool. Factor in record-breaking temperatures, and demand for electricity has reached levels we haven’t seen in years.
Partnership Eases Pressure
Some of the factors that drive wholesale power costs are beyond Baldwin EMC’s control. However, we can actively pursue certain solutions to minimize the impact of spikes in fuel prices.
One way we protect our assets is through our partnership with other electric cooperatives and municipal electric systems through PowerSouth. By pooling our resources with others, we gain economies of scale to help cushion the impact of higher energy costs. PowerSouth actively compares the cost of generation with the cost of power available for purchase from other utilities, choosing the lowest-cost options.
PowerSouth staff also purchases fuel in advance, projecting fuel needs, negotiating lower prices and ensuring adequate supply.
Because Baldwin EMC is a not-for-profit cooperative, we don’t charge our members any more than what’s required to operate the business. In other words, making profits for our shareholders doesn’t factor into the rates we charge members.
However, increases in the cost of the power we purchase to distribute to our members are passed along to members through their power bills.
Over the past ten years, Baldwin EMC has implemented multiple cost-saving initiatives, such as paperless billing, advanced metering, and voltage reduction efforts. These programs and technologies have saved the cooperative millions of dollars in operational costs. These savings translate into lower bills for members, in spite of volatile energy costs.
Baldwin EMC will continue to seek out solutions to stabilize power bills, and maintaining dependable service at the most affordable price possible remains the cornerstone of the co-op’s business model.