SECO Energy is a not-for-profit electric distribution cooperative serving 210,000 homes and businesses throughout seven Central Florida counties. We take pride in providing service to you, our member-owners, and most-valued Key Accounts. As your advocate, the SECO Energy Key Accounts team would like to inform you in advance of rate changes taking effect on January 1, 2020. We are communicating this to you BEFORE the public announcement to our general membership. We realize that many of you may have completed your budgeting process for the coming year, and we apologize for the untimeliness of this news. Unfortunately, our recent contract renewals with third-party vendors has prompted changes necessary for us to maintain a healthy cooperative and reliable electric service for your businesses.
Our 2020 outlook is a mix of good and bad news. The good news is wholesale power is stable, so we’re able to apply an increased Power Cost Adjustment (PCA), aka Hot Bucks, credit to your bill. Beginning January 1, the PCA will increase from $0.01570 to $0.02070. Wholesale power costs represent approximately 68 percent of your SECO Energy billing. The remainder of your bill is for cooperative operations including maintenance, restoration, construction and upgrades to the electrical distribution system on which you depend for reliable service. This is where the mix of bad news comes in. Our costs to construct and maintain the electrical distribution system are rising by a whopping 25 percent for 2020.
The labor market is very tight and contractors who perform maintenance are paying higher labor costs to keep workers on the payroll. This isn’t just a SECO Energy issue. Nationwide electrical utility contractors are struggling to maintain sufficient workforce. One of the more visible reasons was spurred when California utility PG&E was court ordered to significantly increase system maintenance and tree trimming to reduce fire risk. Florida lost a significant amount of its utility-related contract labor workforce to California and we are paying the price, despite a booming economy.
Our 2020 construction workplan continues to build upon our mission to construct, maintain and restore the electric system. Improvements such as storm hardening and tree trimming improve SECO Energy system reliability. System additions, upgrades and automation enhance the service so that disruptions to you are minimal. We have scheduled improvements throughout our entire service area that will also support and enhance our fast-growing system. A detailed map of key projects is included in the upcoming SECO News.
Another reason for the adjustments to our rates is the trend of declining average energy consumption of both residential and commercial facilities. Energy awareness and efficiency improvements along with new technologies have had an impact on kilowatt hour (kWh) sales. This contributes to the financial challenges facing our not-for-profit electric cooperative. In addition, the most recent cost of service study indicates the cost to serve members has risen. These factors and more necessitate an adjustment. The Residential (RES) customer charge will increase 17 cents per day, General Service (GS) will also increase 17 cents per day and the General Service Demand (GSD) customer charge will increase 50 cents per day. The demand charge associated with the GSD rate will also increase 20 cents per kW and the energy charge will change from $0.08890 to $0.09050 but with the increased Hot Bucks (PCA) credit applied to the bill, your energy costs per kWh will decrease. Our lighting rates will remain the same moving into the new year but will also benefit from a larger PCA credit.
The collective increases will raise SECO Energy’s total revenue approximately 3.5 percent for 2020. All changes as noted will be posted on January 1 in our rate tariffs at SECOEnergy.com and changes ensure parity between rate classes. In the meantime, I have linked to a document summarizing the changes reflected in this communication. If you have questions or are interested in a rate analysis to explore the impact of these changes on your billing, please contact your Key Accounts Consultant. We’re here to help!
The bottom line is that none of us like having to increase the customer charge or other components of your bill, but it is quite necessary to ensure continued service reliability. At the same time, we are pleased that stable fuel costs are allowing a larger Hot Bucks Credit (PCA) credit that will offset most or all of the increases depending on your respective usage level. These changes reflect the difficult balance between affordability and reliability.
For the full story on the 2020 Outlook – Rising Costs and a list and map of key projects, read Duncan’s Digest in the upcoming December SECO News.