By the Numbers

The Numbers Behind the Switch: Understanding Wholesale Power Rates

A lot goes on behind the scenes within our cooperative family to calculate electric rates—from the wholesale level to the retail level— and this article breaks down how everything comes together to create the amount you pay each month.

The Journey of Electricity

Understanding all that goes into your electric bill starts with learning how electricity is made and how it’s delivered to your home. In our cooperative network, the electricity you receive at your home is a combination of energy created by wind, hydropower, natural gas, coal or other fuels. Electricity is generated at the same moment it’s needed and wholesale power providers like East River Electric Power Cooperative and Basin Electric Power Cooperative have a watchful eye on the electric system around the clock making sure your lights come on when you flip the switch. Depending on the weather, the generation mix can vary (if the wind is blowing, there’s more wind on the system; if the wind isn’t blowing, more traditional energy sources are used to meet electric usage).

Dakota Energy’s average rates are competitive with surrounding utilities

In 2019, Dakota Energy’s average retail rate according to S&P Global Market Intelligence, an unbiased third-party data collection service, was 10.24 cents per kWh. That’s an “all-in” rate that takes total revenue divided by kilowatt-hours sold and doesn’t account for different rate classes. It’s the best way to compare one utility to another because of diverse rate classes, billing practices and load factors. Dakota Energy’s average retail rate in 2018 was 9.57 and went up 7 percent in 2019 to 10.24.

On the chart below you’ll see that Dakota Energy and East River followed trends from other utilities and continues to be competitive with surrounding utilities.

Compared to other surrounding utilities Dakota Energy’s average rate is competitive, is cheaper than the state’s largest investor-owned utility, and lower than the statewide average. Dakota Energy is slightly higher than a neighboring investor-owned utility. Dakota Energy’s rates have stayed stable over the last several years and their wholesale supplier, East River Electric, has seen three straight years of average rate decreases and East River is projected stable rates for several years to come. S&P Global Rates Comparison Chart *Source: S&P Global Market Intelligence

East River builds and maintains 250 miles of transmission line to serve Dakota Energy consumers

Since Ree Electric and Beadle Electric began decades ago and merged in 1995 to become Dakota Energy, East River Electric and its members have stood by their side to provide wholesale power and invest millions in infrastructure to provide power to their members. Because of immense growth in large consumers of electricity in Dakota Energy’s service territory since 2007, East River has invested millions more in infrastructure to serve these large consumers.

Overall, East River has built and continues to maintain 250 miles of transmission line in Dakota Energy’s service territory and built, owns and maintains 13 substations that serve their consumers. When a storm rolls through the area and takes down power lines, East River linemen and substation personnel respond to the outage and restore power. That’s the commitment to cooperative power supply. By continuing to invest in new infrastructure and maintenance of the poles, wires and substations that are already there, Dakota Energy and the other East River members share in the costs of building and maintaining the system. If Dakota Energy were to leave the East River family, where will they spread their risk if a new consumer wants to build in their area? How will they build transmission to serve new business?

East River Electric invests millions to promote Dakota Energy’s expansive growth

Since 2007, East River Electric and its members have invested millions to help Dakota Energy serve growth in its membership. Dakota Energy’s sales of electricity measured in megawatt-hours (MWh) has grown significantly, thanks in large part to a pair of large consumers. Let’s go back in time to show you the differences in their consumer base and the impact it’s had. Back in 2007, 78.4 percent of Dakota Energy’s electric sales were to residential, farm and small commercial classes of consumers. The remaining 22.6 percent of sales went to larger businesses that pay a rate made up of a few different components than the residential or farm consumer because of the large amount of infrastructure needed to serve those larger consumers.

The changes since 2007 are stark. Over the next few years, Dakota Energy saw a large increase in large consumers when a large turkey plant and an oil pipeline pumping station started operations in their service territory. By 2019, Dakota Energy’s large consumers made up nearly 51 percent of their total sales, a huge increase from 22.6 percent in 2007. The remaining 49 percent of sales in 2019 were to residential, farm and small commercial accounts.

The nature of the larger consumers necessitates a lot more investment in transmission infrastructure and very little investment by Dakota Energy alone because they have very little infrastructure to serve the business. The bulk of the investment comes from East River and its members.

East River Electric’s Average Rate Falls for Third Straight Year

East River Electric’s average wholesale rate fell for the third straight year in 2020. The rate includes all of the costs that go into providing power to its members and is averaged out among all rate classes. The average rate in 2017 was $0.0645 cents per kilowatt hour delivered. In 2018, the rate went down to $0.06185 cents, and kept the downward trend in 2019 averaging $0.06164 cents. Through the end of December 2020, the average rate was $0.06093. In 2021, East River's average residential rate to our members is currently $0.05939. This downward trend can be attributed to many factors, but one fact remains: East River Electric controls its costs and works to ensure our member systems are receiving quality service and reliable electricity for the most affordable cost.