Changes Affecting Where Your Electricity Comes From: The Electricity “Supermarket”

The history of your electric cooperative dates back to 1937. Powerlines were being built at a rapid pace to deliver electric power to rural homes, farms and businesses so they could take advantage of this life changing technology. A technology that would provide light, pump water, keep food fresh, and power motors. It would make life so much easier and more productive.

Today, your cooperative provides electric service to about 1,760 meters across Union County. Over the past 80 plus years, we have found more and more ways to utilize that electric energy. Ways that could not have been imagined or dreamed about when this cooperative was started. Technology will continue to advance and we will continue to find more ways to utilize electricity to make life more convenient and be more productive.

Our electric power supply has also seen changes that affect the way we do business. Traditionally, Basin Electric Power Cooperative was responsible for electric generation assets that would provide electricity to Union County Electric and all of its member cooperatives across 9 states. Today, utilities and cooperatives like Basin Electric work together through Regional Transmission Organizations or RTOs. Belonging to an RTO allows the sharing of generation and transmission resources in an effort to avoid duplication and deliver electricity at a lower cost.

There are several RTOs serving various regions across the United States. To oversimplify what an RTO does could be described as a supermarket for electricity. Every day, utilities who are part of an RTO sell every kilowatt of electricity they produce to the RTO and then buy back every kilowatt they need from the RTO. This is done through a bidding process, and power produced at the lowest price is generally sold first.

As you know, electricity is produced with natural gas, wind, nuclear, coal and several other resources. Each generation type has different limitations, different costs for production and is offered into the RTO market at different prices, quantities, and times of the day. When the demand for electricity is high, prices rise as more expensive generation units come online. Inversely, there are times when there is an oversupply of electricity and prices go down.

To most of us, the concept of a market for electricity sounds like a pretty good deal, right? Unfortunately, it is not that simple. The RTO has volumes of rules and requirements to insure we have a reliable source of electric power. Being part of an RTO allows us to have a higher amount of generation reliability and a more diverse generation portfolio. We are also able to take advantage of market purchases when real-time energy prices are low.

The energy market can have wild price swings, which we saw in Texas during the winter of 2021. Relying solely on market purchases would put our members at great risk of these price fluctuations. That’s why we view it as important to own several types of generation assets and not put all our eggs in one basket.

While we are all used to thinking of electricity in kilowatt hours (kWh), there are several components that are typically not billed separately. Things like capacity, demand, or transmission charges. In fact, there are dozens of items that are tracked and accounted for within the RTO that the member doesn’t see.

So what does all this mean to you? I suggest you become more familiar with the terms used in the electric industry. For example, knowing and understanding terms like demand, energy, and off-peak will help you to make better energy decisions in the future.

I predict that someday in the future, all of our electric bills will include facility, demand, energy and other components based on the cost to deliver electric energy to you when you need it. This does not mean electric costs will increase. It simply means that each monthly electric bill will more accurately reflect how and when we utilize electric energy resources. It also provides an opportunity for members to have more control over their electric bill based on how they utilize energy.

Until next month, stay safe and God bless.

Quote of the Month:

“Tell me and I forget. Teach me and I remember. Involve me and I learn.” – Benjamin Franklin –Inventor, Statesmen