SMECO sought to soften the blow in a press release distributed today. They argue that the increase is "more than offset by the decrease in SMECO's Standard Offer Service (SOS) energy charges that customers have realized over the past couple of years." Raw energy (oil, natural gas, coal) prices have plummeted in recent years due the worsening world-wide economic depression. SMECO says the average residential bill in 2015 was $25 to $30 less than the average bill in 2014 due to lower energy prices.
SMECO says its residential Facilities Charge, which has not changed in 21 years, will increase by 90 cents, from $8.60 per month to $9.50 per month. The residential Distribution Charge, which has not changed in five years, will increase from $0.03606 (3.606 cents) per kilowatt-hour (kWh) to $0.04336 (4.336 cents) per kWh, just about ¾ of a cent. Distribution Service rates reflect the investment SMECO makes in substations, poles, transformers, power lines, hardware and software, people, and buildings.
"For every improvement we make to our electric infrastructure or technology systems, for every line we replace or substation we upgrade, for every building, every line truck, every new line to every new neighborhood, there is a cost. Those costs are reflected on our customer-members' bills and they are an investment in the electric system that brings power to every home in Southern Maryland every day," said Austin J. Slater, Jr., SMECO president and CEO.
Slater explained, "Our rates reflect the price we pay to provide a high level of electric service reliability. In the past six years, SMECO has invested more than $377 million in infrastructure, including the Southern Maryland Reliability Project, which was completed in November 2014 at a cost of $108 million. Our goal is to maintain the highest standard of reliable service for our customer-members."
It can also be argued that Slater's increase in compensation in recent years has contributed to higher rates for consumers. His salary increased 72% from 2004 through 2014 (from $231,596.00 to $398,090.00), according to data SMECO submitted to the government (Federal Energy Regulatory Commission Financial Report). The Social Security Administration's Average Wage Index (AWI) increased 30% over that same period (from $35,648.55 to $46,481.52).
The main component of the bill, the SOS energy charge, together with the Power Cost Adjustment, covers the cost of power. That portion of the customer bill has decreased over the past few years, hitting a 10-year low in June 2015. SMECO makes no profit on Standard Offer Service. The wholesale price that SMECO pays for power is passed on to customers without any mark-up. SMECO's new Distribution Service rates do not affect the SOS costs for energy, which make up about 60 percent of the average residential customer bill.
SMECO is an electric cooperative. It is owned in whole by its customers, also known as "members."
The chart shows the increase in salaries between 2004 and 2014 for key SMECO officers vs. the Social Security Administrations's Average Wage Index (AWI). Data Source: 2004 and 2014 SMECO Federal Energy Regulatory Commission Financial Reports.